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Kuwait MPs urge action to avoid economic 'collapse'

“The (stock) market and economy are deteriorating. This will have social consequences. If the government does not intervene, the economy will collapse,” MP Adnan Abdulsamad warned during a debate in parliament.

“We should not remain spectators while the country and its economy are at risk. Our economic security is threatened ... and this could lead to a disaster,” Islamist MP Khaled Sultan bin Issa said.

Parliament later approved a request to hold a special session on February 10 to discuss the emirate’s economic and financial status in the wake of losses to Kuwait’s foreign investments and a drop in oil revenues.

Lawmakers called on the government to come up with an urgent stimulus package to reinvigorate domestic economy and the stock market which have been impacted by the global economic downturn.

The Kuwaiti cabinet on Monday reviewed the economic rescue package aimed at protecting the emirate’s financial system from the fallout of the global economic downturn but deferred a decision until next week.

On Wednesday, Al-Anbaa newspaper published a copy of the plan which envisages the state purchases of toxic assets to shore up the banking sector.

It also stipulates allocating four billion dinars (14 billion dollars) to guarantee old and new bank credit facilities to overcome a credit crunch and help provide new loans for troubled investment firms.

State Minister for Cabinet Affairs Faisal al-Hajji told parliament that the government will refer the proposed package for parliamentary approval when it is ready.

A number of Kuwaiti investment companies have defaulted on loans as credit facilities have become difficult to obtain and the value of their assets have dropped sharply.

Kuwait Stock Exchange has slumped about 60 percent since hitting its peak at the end of June 2008, shedding well over 100 billion dollars of its capitalisation.

Oil revenues, which make up 95 percent of the emirate’s income, have fallen rapidly in the past four months as oil price dived from more than 147 dollars a barrel in July to just above 40 dollars.

Kuwait is however expected to post a surplus this fiscal year which ends March 31 on the back of huge oil revenues it earned in the first half of the year when oil prices rose sharply.