In a landmark decision, Kuwait’s parliament has approved a plan to buy citizens’ personal loans, write-off the interest and reschedule repayments.
Reuters has quoted Kuwaiti Finance Minister Mustapha al-Shamali as saying that the government was expecting to spend an estimated USD 2.6 billion on the plan. The bill would cover personal loans taken before the end of March 2008 from commercial banks. Under the plan, banks would also be obligated to return any overcharged interest to citizens, any interest charged at more than four percent over the discount rate would be termed “overcharging”.
Several lawmakers were elected in December who pledged to make debt relief in the Gulf state a priority during their campaigns. While some economists and government officials raised concerns about the long-term sustainability of such measures, they were seen as important to provide relief to some heavily-indebted citizens of the oil-rich state. Fifty legislators supported the bill — only four voted against it.
The original plans for a total bailout for heavily-indebted citizens, involving billions of dollars of household debt did not meet with the approval of policymakers. The International Monetary Fund had also expressed its worries about such programs, stating that Kuwait could completely exhaust its oil savings by 2017 if government spending continued at the current rate.
Back in 2011, Kuwait launched a different financial aid program for its citizens. As a celebration to mark three major anniversaries, ruler Sheikh Sabah al-Ahmad al-Sabah had granted 1,000 dinars to each of the country’s 1.2 million citizens and free food rations for 13 months. The government is committed to using its vast oil wealth to promote a welfare state that would prevent social unrest and any major Arab Spring-inspired political upheaval.