KUWAIT: Kuwait’s fiscal and external accounts have been adversely affected by the lower oil prices, and financing needs have emerged. Resilient nonoil activity and strong oversight by the Central Bank of Kuwait have kept the financial sector sound. The key challenge for policymakers is to implement the government’s comprehensive six-pillar reform plan, which aims at promoting fiscal consolidation and boosting private sector growth, diversification, and job creation for nationals. Notwithstanding large buffers that provide policy space to smooth the necessary adjustment, policymakers have initiated important fiscal reforms. These should be sustained to gradually raise fiscal savings, focusing on further rationalizing energy subsidies, containing the wage bill and increasing nonoil revenue, which will create space for higher growth-enhancing capital outlays. Better aligning labor market incentives, promoting higher productivity through privatization and partnerships with the private sector, and further efforts to improve the business climate are key to encourage diversification, private sector development and employment opportunities for nationals.
The IMF team highly values the candid and comprehensive discussions with the Kuwaiti authorities. Staff would like to express its sincere gratitude to them for their hospitality and excellent cooperation.
