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Hands off economy, cent-bank tells Kuwait government

The state is the main employer for the local population in the U.S.-protected emirate, which produces 2.4 million barrels per day of crude. The government runs a comprehensive welfare system that subsidises higher education and healthcare, and maintains several restrictions on foreign ownership.

“We need economic restructuring to address the dominance of the public sector over economic activity,” Sabah told the Arab Economic Forum, a regional business conference taking place in the Lebanese capital.

Sabah said the government should resist calls to interfere in the stock market after a recent collapse that hit bourses in the Gulf.

“The correction was warranted. Blue chip stocks in general maintained their value. Stocks that rose 300 percent in weeks collapsed on speculation. They should not have risen in the first place,” Sabah said.

Sabah said the central bank’s priority was to keep inflation low at around 1 percent and maintain a strong banking system with 292 banks and financial companies under its supervision compared with 77 seven years ago.

“The economic boom brought a lot of liquidity to Kuwait and we interfered to mop it up,” Sabah said.

“Our foreign currency reserves have reached record levels. Capital inflows have not been just oil. One deal alone brought in almost $4 billion,” he said.

Sabah was referring to Qatar Telecommunication’s $3.72 billion acquisition of a majority stake in Kuwait’s National Mobile Telecommunications cell phone company in March.

Official data showed the central bank’s foreign assets standing at 6 billion dinars ($21 billion) in March. Kuwait has kept its currency peg to the dollar despite the sharp falls in the greenback.

Sabah, a member of the pro-USroyal family, declined to answer questions whether Kuwait was considering revaluing the dinar in favour of the euro. He gave no hint that a currency policy “Kuwait has kept from the 1970s” would change.

Sabah said Kuwait was slowly opening its banking system with several Gulf Cooperation Council banks were recently granted licenses. “Banks from the wider Arab world are next in line to be allowed in,” he said.