Kuwait rescue plan too small says StanChart
Kuwait City, February 10, 2009
A government rescue plan will help Kuwait's financial sector but its total value of $5 billion may not be enough to mitigate the impact of the global crisis on the Opec member as a whole, Standard Chartered said on Tuesday.
On Thursday, Kuwait's cabinet approved a stimulus package worth 1.5 billion dinars ($5.1 billion) including state guarantees of up to 50 percent for fresh loans banks provide to local firms.
"Markets were anticipating a larger rescue plan and there are concerns that $5 billion would not be enough," Standard Chartered said in a note to clients.
Central Bank Governor Sheikh Salem Abdul-Aziz said on Sunday he expected local banks to provide loans to companies worth up to 4 billion dinars this year and next, of which Kuwait would guarantee 50 percent.
Kuwait will also guarantee half of all loans local banks provide to investment firms to reschedule debt and 25 percent of those from foreign creditors, according to the plan.
Standard said the government needed to increase spending to help the economy.
Kuwait is expected to cut spending by about 7 billion dinars in the 2009/10 fiscal year starting in April mainly due to much lower contributions to social welfare funds, the head of parliament's budget committee said last week. - Reuters