Kuwait yesterday finally put into effect a $5-billion (Dh18.36bn) stimulus plan to shore up the domestic economy in the face of the global economic meltdown.
The plan, which was stalled for almost two months in the dissolved parliament over political differences, aims to assist troubled investment firms, some of which have already defaulted on debt, and encourage banks to offer new credit.
By-laws of the economic stabilisation bill, issued last month in a decree by the outgoing cabinet, appeared in this week's edition of the official gazette Al Kuwait Al Yom, meaning the legislation is now effective. The state will guarantee 50 per cent of an estimated KD4 billion of new credit facilities to be granted by banks to local companies this year and in 2010.
It also provides 15-year guarantees against any drop in the value of local banks' investment and real estate portfolios, as well as their old loans to local companies.
The law allows the emirate's sovereign wealth fund, Kuwait Investment Authority, to buy into new capital increases of companies or banks if shareholders fail to fully subscribe to the increase.
Kuwait's distressed investment firms will be able to use new credit to repay part of their debt to foreign banks and financial institutions, according to the legislation.
Last year, Kuwait guaranteed deposits of all banks operating in the country after the Gulf Bank lost more than a billion dollars on derivatives deals. Debt accumulated by the 99 Kuwaiti investment firms is estimated at $18bn, of which $7.6bn is owed to foreign banks and financial institutions.
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