Kuwait inflation hits fresh record in October
Annual inflation in Kuwait rose for the third month in 4 to 7.3 per cent in October, a fresh record, likely intensifying pressure on the government to consider options such as more lending curbs and bond sales.
The All Items Consumer Price Index in the world's seventh-largest oil exporter advanced to 121.2 points at the end of October, compared with 113 points a year earlier, according to government data received on Thursday. Inflation in September was 6.2 per cent.
Kuwait broke ranks with its Gulf Arab partners in May dropping its peg to the declining dollar in a bid to control inflation that it partly blamed on more expensive imports. The currency has since appreciated 5.6 per cent.
"This is definitely proof that the currency appreciation has not had enough effect," said Philippe Dauba-Pantanacce, senior Middle East and North Africa economist at Standard Chartered.
Options include tightening lending curbs on commercial banks and selling sovereign bonds to soak up surplus funds, he said.
Across the Gulf, oil producers – all of which bar Kuwait – peg their currencies to the dollar, are struggling to control inflation at record or near record levels.
The pegs force them to track the United States in lowering interest rates to maintain the relative value of their currencies, at a time the US economy has faltered and Gulf economies are surging on oil prices that have more than quadrupled in the last six years.
"We need to develop ... more instruments to provide more investment opportunity for the public ... and in order for central banks to use such kind of instruments to intervene in the market for the sake of regulating liquidity," Kuwait Central Bank Governor Sheikh Salem Abdul Aziz Al-Sabah said in London earlier this month.
Saudi Arabia, Oman and Qatar are among the countries that have increased the share of deposits that commercial banks cannot lend, among other inflation battling measures that include raising state salaries and rent controls. (Reuters)
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