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21 February 2024

Kuwait set to act on inflation problem

By Agencies


Finance Minister Mustapha al-Shamali said on Sunday Kuwait was implementing measures to curb inflation which hit a record 6.2 per cent in September.

He gave no details of the measures but said the currency basket against which Kuwait tracks the dinar would "play a role."

Kuwait broke ranks with its Gulf Arab neighbours last May by dropping its currency's peg to the U.S. dollar, saying weakness in the greenback was fuelling inflation by making some imports more expensive.

The desert Gulf Arab state pays for a third of its imports in euros.

"We are currently working on reducing the inflation. There are several measures. There are many options," Shamali told reporters on the sidelines of a banking conference.

When asked if price rises would ease this year, Shamali said: "I hope so".

Kuwait said last month it would improve its food subsidies system and tighten controls to prevent unjustified price increases.

Inflation in the Middle East's fourth-largest oil exporter is expected to fall to 4.3 per cent this year after hitting 4.4 per cent in 2007, according to a Reuters poll of 12 economists in December.

The dollar pegs force Gulf central banks to track U.S. monetary policy at a time when the Federal Reserve is cutting interest rates to contain the fallout of a mortgage crisis.

The country was "looking cautiously" at credit growth and was concerned about how an acceleration in lending could affect the economy, its central bank governor said earlier on Sunday.

Kuwait has left its benchmark discount rate, which banks use to determine lending rates, unchanged at 6.25 per cent following three U.S. interest rate cuts since September 18. (Reuters)