Kuwait has made the least progress among Gulf states to address government wage bill, states World Bank

Kuwait has made the least progress among countries of the Gulf Cooperation Council to reform its wage bill, the World Bank's lead economist for the Gulf said on Monday.

"In Kuwait, they have actually increased hiring in recent years, and after the oil price drop [of 2014], they actually increased hiring from 15,000 a year to 25,000 a year which is almost a whole cohort," said the World Bank's Ismail Radwan at a news conference in Dubai.

"So we have a situation now where one-third of the Kuwaiti civil service has been recruited in the past five years, so that's why we say it's unsustainable," Radwan said.

Hit hard by lower oil prices and the Covid-19 pandemic last year, the OPEC oil producer was facing liquidity risks largely because parliament has not authorised government borrowing due to a standoff. S&P in July cut Kuwait's rating by one notch to A+ from AA-(minus)and kept its outlook on the country negative, citing the country's lack of a funding strategy to finance its deficit.

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The Gulf Arab State raised billions of dinars last year through asset swaps with the Future Generations Fund, a nest egg for when the country's oil runs out.

Radwan said the World Bank was in talks with Kuwaiti authorities to address the government wage bill. If the country does not take action, their expenditures will continue to deplete their financial reserves, he said.

Kuwait can start borrowing, or it can tap into the Future Generations Fund, he said.

"But that has always been the case in Kuwait that that money was there for when the oil runs out. So it was only opened once, and that was after the Iraq invasion. So this would be a tremendous precedent to open that money and spend it on wages and salaries."

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