50 ALRAQABA . ISSUE 18 Ramadhan added that the adoption of a public debt law is essential for regulating the State’s finances. However, depending on the public debt to fund the ongoing expenditure repeatedly without implementing any economic reform is utterly unacceptable. Furthermore, Ramadhan has emphasized that it has become necessary to launch a number of trajectories and measures that would assist in reducing the ongoing expenditure in the short and medium terms. In addition, there is no need for the State to borrow any further, mainly after exhausting the liquidity to borrow in order to pay for the temporary final account deficits. Examples of such measures would be increasing the cost of public services and obligating independent entities to self-fund. Moreover, a transformation has also to take place in the social construct of linking government employment with the distribution of public wealth. Different alternatives have to be offered such as the Universal Basic Income (UBI) and the social security net (SSN), which would contribute to easing the financial burden off the State, yet without affecting the minimum standard of living for the citizens of such a wealthy State like Kuwait. Ramadhan also stated that public debt is considered a short to a medium-term solution, depending on the conditions of the budget deficit. By taking such a solution, the ongoing final account deficit caused by the delay in economic reforms would exhaust the public debt funds. Eventually, the need for more debts would continue. Consequently, the State would fall into a debt trap where creditors would have a monopoly on the State’s financial decisions in return for allowing the debts to remain and grow. Ramadhan pointed out that the government of Kuwait is taking immediate solutions such as the redeployment of funds between the General and the Future Generations Reserve Funds in order to fulfill its obligations. However, these solutions are administratively unacceptable, and this is causing additional, unnecessary and avoidable drops in the State’s credit rating at international agencies like Moody’s, Fitch and S&P. What’s more, is that any additional drop in credit rating would be risky especially with the existence of huge financial and oil reserve funds. Ramadhan mentioned that such damages could be easily prevented and that there is no need to exaggerate the consequences of the drop in credit rating and its impact on the value of the ever-stable Kuwaiti Dinar, as this would lead to losing the right to call for maintaining the credit rating or diminishing the credibility of such calls. Each drop in the credit rating would contribute to escalating the value of the government’s debt, as well as the debt value of banks and Kuwait’s financial institutions. This would have an impact on Kuwait’s private sector in general. Therefore, it appears that there is no way out other than initiating economic reforms and adopting the publicdebt lawand the limitedFutureGenerations Reserve Fund withdrawal law in the case of a deficit. Ramadhan also mentioned that the Covid-19 pandemic had impacted the country’s oil revenues as it caused a severe slump in oil prices in 2020. The pandemic also caused an increase in government expenditure which was directed at facing the pandemic, and this in its turn, has caused a growth in the final account deficit, an aggravation of the liquidity risk, a drop in credit rating, and the urgent need to pass the public debt law. Nevertheless, the value of Kuwait’s public debt has not increased significantly, owing to the worldwide interest reduction that was emplaced to face the consequences of the pandemic. In the end, the economic consultant Mohammed Ramadhan recommended that the Council of Ministers must approve a proper public debt law that prohibits long-term debt as well as debts with terms above ten years. This is because the ongoing expenditure on salaries, etc., which make up the bulk of public expenditure, would not contribute to the economy as would the capitalistic expenditure on tangible progressive projects. Moreover, the consultant recommended that the Parliament of Kuwait approve a law allowing a limited withdrawal from the Future Generations Reserve Fund in case of a final Article Feature Article Feature
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