Kuwait to transfer 2b dinars to General Reserve Fund

Kuwait City: Kuwait’s Ministry of Finance is preparing to transfer 2.05 billion Kuwaiti dinar in liquid cash after the parliament approved a law limiting the transfer of state funds to the Future Generations Fund, Al Qabas reported.

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The cash will be pumped into the General Reserve Fund, which will enhance the liquidity of the fund until the government finds alternative means of enhancing liquidity, a source told Al Qabas.

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Law on fund transfer

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On last Wednesday, the National Assembly passed a law that would limit the transfer of funds from the General Reserve Fund to the Future Generation Funds. The law would allow funds to be transferred contingent on a budget surplus, as in the past 10 per cent would automatically be transferred from the General Reserve to the Future Generation Fund each year.

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The Future Generation Fund, the oldest sovereign wealth fund in the world, is set up as a security option for the future generations Kuwaitis. The General Reserve Fund is the government’s main source of budget financing. Both funds are managed by the Kuwaiti Investment Authority (KIA).

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The source said that this transfer is a temporary solution. The transfer of 2 billion Kuwaiti dinars will not be sufficient to cover government spending, such as salaries, for more than a few months as long as the price of oil keeps dropping.

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Economic downturn

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Drop in oil prices and the COVID-19 pandemic have adversely impacted Kuwait’s economy with the government expenditure far exceeds the government revenue.

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Last week, the National Assembly turned down a Public Debt law that would allow Kuwait to borrow 20 billion Kuwaiti dinars, over the next 30 years.

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The General Reserve Fund depleted by 1.5 billion Kuwaiti dinars within last 38 days. The government has been tapping into the General Reserve Fund to obtain liquidity amidst widening deficit. S&P Global Ratings predicts that the General Reserve Fund will be unable to handle the economic downfall alone.

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