Kuwait raises risk on consumer loans to 100%

Kuwait's central bank has increased the risk on consumer and mortgage loans to 100 per cent from 75 per cent as the country grapples with record inflation, a newspaper yesterday said, citing new central bank instructions.

It also set the risk level at 150 per cent on facilities to finance trading in shares or real estate activities, regardless of the credit rating of the borrower, Central Bank Governor Sheikh Salem Abdul-Aziz Al Sabah said.

He did not provide the previous risk level.

The bank kept the risk level for loans to small- and medium-size businesses of no more than 250,000 dinars (Dh3.4 million) at 75 per cent, according to the instructions.

Inflation in Kuwait, the only country in the world's largest oil-exporting region that does not peg its currency to the US dollar, hit a record 9.5 per cent in January as housing costs jumped 16.1 per cent and food prices rose 7.7 per cent.

Sheikh Salem said in a statement published in the paper that average credit growth was still accelerating in Kuwait, with the banks' loan portfolios up 35 per cent at the end of March compared to the same period last year.

"This prompts the central bank to look at applying several methods it sees appropriate to lower the sharpness of inflationary pressures on the economy and lower the risks… resulting from an expansion of granting facilities which is constantly affecting the pillars of monetary and financial stability in the country," he said.

He did not elaborate on the country's anti-inflationary measures.

In other Gulf states, including the UAE and Qatar, governments have introduced rent caps to try to combat real estate price inflation.

The Kuwaiti central bank tightened curbs on consumer lending beginning March 30 to try to rein in inflation.

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