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Kuwait faces a deferred liquidity crunch

Monday, June 7, 2021

Significance

The impact of the pandemic and especially lower oil prices hit the government budget hard, since more than nine-tenths of revenue comes from oil sales. However, the country also faces longer-term structural challenges that undermine project implementation.

Impacts

  • The emir will seek to avoid fresh elections, which could bring an even more obstructionist National Assembly.
  • Tensions with parliament will prevent consideration of measures such as an excise tax on harmful products or a Gulf-agreed value-added tax.
  • The government will resist legislative pressure to scale down generous foreign aid, seen as an important source of global soft power.
  • The authorities could approach various government entities for dividend transfers to push back the risk of a liquidity crunch.

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