ALRAQABA . ISSUE 18 49 are undeniably challenging. With respect to downgrading Kuwait’s credit rating, Al-Thaqeb noted that such a move was expected to be taken by the credit rating agencies given that most of their reports have previously assigned Kuwait a very high score due to the high liquidity of both its general reserve fund and the future generation fund. These two funds act as a safety valve for the State’s public finances, particularly the general reserve fund. The significance of the general reserve fund is attributable to the fact that theKuwaiti government primarily relies on this fund to finance its budget deficits. Besides, he pointed out that when the liquidity of the general reserve fund is about to deplete, the sovereign rating and the future visionof theStatewill expectedlybe reconsidered. It is necessary to sensitize the society to Kuwait’s budget, which is found to be in a challenging fiscal condition, Al-Thaqeb said. In February 2020, the Ministry of Finance announced that the projected deficit for the fiscal year 2020/2021 was approximately 9.2 billion Kuwaiti dinars. The new budget update released by the Ministry of Finance reflects an estimated deficit of 14 billion dinars, the highest deficit in the country’s fiscal history. Al-Thaqeb stated that drawing from the future generations fund is one of the options on the ground to solve the deficit problem, yet it is not the right option. He pointed out that the future generations fund acts as the safety valve for Kuwait’s finances, noting that this fund has primarily helped the country to conduct all affairs and support its position and the Kuwaiti people during the brutal Iraqi invasion. Indeed, this was the only time the State’s future generations fund was ever touched. Further, Al-Thaqeb highlighted that the purpose of the future generations fund is to safeguard the future of our children and grandchildren and guarantee them a decent life. It would not, therefore, be reasonable to touch the fund without taking affirmative steps toward budgetary reforms. Al-Thaqeb also stressed that having a clearly defined reform plan is imperative before considering using this fund. He noted that in the absence of such a plan, the amounts drawn from the fund would be wasted on current expenses. Consequently, the same mistake made in the past years would happen again, in which Kuwait failed to exploit the general reserve fund properly to solve the deficit problem. Finally, Al-Thaqeb indicated that it would be wise to refer to an economic vision entitled “Before It Is Too Late,” which he presented together with a group of 29 academic members of Kuwait University. This vision particularly discusses the imbalances in the national economy. It indicates that sustaining the welfare state of today requires sacrifices on the part of the present generation. In addition, the vision lays out possible solutions and policies for course correction. Ramadhan: ‘Sooner or Later, Liquidity Crisis Will Be Back- With Larger Debts, Lower Credit Rating and Tougher Solutions’ The economic consultant Mohammed Ramadhan stated that we would eventually return to the starting point, which is ‘lack of liquidity,’ only with larger debts, lower credit rating, and tougher solutions. It is worthy to mention that if we were to face a liquidity problem due to the State’s revenues dropping lower than its expenses, then it is certain that allowing a bigger debt would be of assistance only temporarily as long as the drop continues, as the ongoing final account deficit would eventually feed on all the borrowed funds. Ramadhan stressed that a proper public debt law should be enacted in order to prohibit long-term debt as the ongoing expenditure on salaries, etc., which make up the bulk of public expenditure. This would not contribute to the economy as would the capitalistic expenditure on tangible progressive projects. Ramadhan also called for adopting a law that allows a limited withdrawal from the Future Generations Reserve Fund (FGF) in case of a final account deficit. This would assist in leveraging the State’s revenues as well as delaying the liquidity problem for a longer term, thus allowing the State to earn the rewards of long-term economic reforms. At the same time, the impact of this limited withdrawal will not diminish the fund’s assets as some claim, but it would only slow down its growth. Article Feature
RkJQdWJsaXNoZXIy Mjk0NA==