Kuwait inflation jumps to fresh record on rents

 

Annual consumer inflation in Kuwait, which dropped its dollar peg last year in an effort to curb rises in the price of imports, accelerated to a record 7.54 per cent in December.

 

The All Items Consumer Price index rose to 124.1 points at December 31, compared with 115.4 points a year earlier, government data obtained by Reuters on Tuesday showed.

 

Inflation in November was 6.68 per cent, just below October's earlier record of 7.26 per cent.

 

Housing costs surged 16.1 per cent and food 6.3 per cent, the data showed. Education and medical care costs rose 11.6 per cent.

 

"Rents are a domestic factor the central bank cannot do much about it," said Monica Malik, regional economist at EFG-Hermes investment bank in Dubai.

 

Inflation could climb further as more foreigners move to the world's seventh-largest oil producer, attracted by an economy that is growing on extra government spending, Malik said.

 

Kuwait, the world's seventh-largest oil exporter, is the only Gulf Arab state that does not peg its currency to the dollar. It dropped the peg last May in favour of a basket for currencies, in an effort to control imported inflation.

 

The country pays for about a third of its imports in the euro, which has gained almost 8 per cent against the dollar this year alone.

 

Since dropping the peg, the Kuwaiti dinar has gained 8.78 per cent against the dollar.

 

"The currency basket cannot do much about domestic factors, such as rents, though without the currency basket inflation would have been even higher," Malik said.

 

Last month, the central bank tightened rules on consumer lending to try to rein in inflation.

 

Borrowers arranging fresh loans are now limited to monthly interest and repayment installments equivalent to no more than 40 per cent of their salaries, compared with 50 per cent before.

 

For those on pensions, the limit is 30 per cent. (Reuters)