Financial markets: Is it too late for Kuwait?
The country’s model of financing relentless consumption from dwindling oil revenues is under attack from all sides. Covid-related credit relief has hit the banks’ bottom lines and they are joining the call for diversification.
In November last year, the cosy club of sheikhs and their courtiers who have long ruled over Kuwait was somewhat shaken when a paper written by 29 of the oil-dependent emirate’s most respected economists landed on official desks and in bankers’ inboxes.
Entitled ‘Before It’s Too Late,’ the 28-page commentary on Kuwait’s economy didn’t pull any punches. In what amounted to a blistering call to arms, the economists levelled the blame for mismanaging the economy directly at the country’s ruling elite.
Kuwait was in the thrall of an embedded “rentier culture” of financing relentless consumption from dwindling oil revenues its authors claimed. The country’s leadership was “lacking in farsighted strategic planning” necessary to pivot Kuwait away from its near-absolute dependence on hydrocarbons.
This was a failure, the economists warned, that threatened Kuwait’s very existence.
“The current state of the Kuwaiti economy is unsustainable,” the paper declared. “It is likely that Kuwait missed the opportunity to avert the inevitable catastrophe completely, leaving us only with the hope of trying to mitigate its effects. The challenges facing our country require us to be honest with ourselves and comprehend that the era of wealth distribution as we have known it has passed.