Jan. 28 (Bloomberg) -- A Kuwaiti parliament panel approved writing off interest payments on bank loans taken by nationals over five years, in another attempt by lawmakers to bail out indebted citizens in the oil-rich country.
The finance and economic committee voted in favor of scrapping the interest on loans taken between January 2002 and April 2008, the state-run Kuwait News Agency reported. The committee also approved a proposal granting 1,000 dinars ($3,550) to each Kuwaiti who hasn’t taken a loan, the agency reported, citing committee member Safaa al-Hashem.
The proposal to write off interest payments, which is opposed by the government, still requires approval of the house. Central Bank Governor Mohammed al-Hashel said the interest on loans is an estimated $6 billion, the news agency reported on Jan. 13.
Previous attempts at passing such a law have failed. In 2010, the government refused to endorse a bill that would have cost the state about $23 billion to buy personal loans and write-off accumulated interest. The government said at the time the measure was unconstitutional and threatened the stability of the country’s banking system. Finance Minister Mustafa al- Shimali has repeatedly said the government has no intention of supporting such proposals.
‘Bribing the Citizen’
“Here in Kuwait, the homeland is rights without duties, and the conflict is about bribing the citizen while the economy depends entirely on oil exports, which is a temporary and unstable source,” Kuwait-based Al-Shall Economic Consultants said in a report Jan. 27. “Any talk about dropping loans or their interest is a call for more borrowing, or a call for abandoning prudence in managing the family or the citizen’s budget. What is spent to finance this proposal is deduction from an asset, and is not the outcome of an economic activity.”
In 2007, the government set up a fund to help retail borrowers repay their loans. The central bank governor said in October that about 26,000 Kuwaitis who had registered with the fund had received interest-free loans of 420 million dinars, adding that he was opposed to scrapping interest payments on citizens’ debts.
Kuwait, the fourth-biggest producer in the Organization of Petroleum Exporting Countries, posted a record budget surplus of 13.2 billion dinars in the last fiscal year as oil production and prices rose. The International Monetary Fund forecasts economic growth at 1.8 percent this year, down from estimated growth of 6.6 percent in 2012. The country will exhaust all oil revenue by 2017 if the government’s current spending policy continues, the IMF said last year.
--Editors: Shaji Mathew, Inal Ersan