Kuwait oil income falls after depeg

Kuwait's oil revenues have fallen by 790 million Kuwaiti dinars (Dh10.9bn), as a result of the government's decision to depeg from the US dollar in May 2007, according to a study by Aljoman Centre for Economic Consultancy.

Losses resulted from reduced oil income calculated in dollars. The income forms a major part of the country's revenues. The dollar's value has declined by 7.5 per cent since the government made the decision to depeg.

Kuwait's experience may act as a cautionary tale for other GCC countries considering following Kuwait's decision to peg to a basket of currencies, the study found.

Commenting on the study, Kuwait's Ambassador to the UAE Faisal Abdullah Al Mishaan said despite the hit to oil revenues, de-pegging has yielded big gains for the country's economy as the dinar continues to rise against the dollar.

Depegging, he added, has helped stop the deterioration in purchasing power of the dinar, which had contributed to inflation – especially in terms of imported commodities. He noted the dollar had fallen against the euro by 14.7 per cent since depegging, compared to a 5.5 per cent drop in the value of the dinar against the euro over the same period since May 2007.

Al Mishaan added Gulf currencies have lost some 40 per cent of their purchasing power over past five years, while the dinar's loss has not exceeded 20 per cent.

However, the ambassador reiterated his country's commitment to all resolutions made by leaders of the Gulf Co-operation Council, including the unified currency decision, expected in 2010.

The number

790m: Was the fall in oil revenues in Kuwaiti dinars as a result of the decision to depeg from the US dollar.

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