Kuwait's central bank urged the government to tackle record inflation by giving away more land and resisting calls to boost spending, state news agency Kuna quoted the bank's governor on Wednesday.

Inflation in the world's seventh-largest oil exporter jumped to a record of 9.5 percent in January, driven by a 16.1 percent rise in rents and 7.7. percent rise in food costs.

'Monetary tools alone won't be able to curb inflation,' Sheikh Salem Abdul-Aziz al-Sabah told Kuna.

He said spending growth rates, and especially current expenditures, should be limited despite demands to pay out Kuwait's massive oil-generated budget surplus.

The government projected expenditures of 18.5 billion dinars for the 2008/08 fiscal year after posting a budget surplus of 11.4 billion Kuwaiti dinars ($42.65 billion).

At rallies ahead of parliamentary elections on May 17, candidates have demanded the government raise state subsidies and pay out the surplus to citizens.

Unlike other family-ruled Gulf countries, Kuwait's parliament -- which has a history of challenging the government -- has a real say in politics and must approve all key laws as well as the annual budget.

The central bank governor also said the government should provide more land, which is almost entirely owned by the state, to businesses and individuals.

'This helps bring down prices of production of goods and providing of services,' he said.

Sheikh Salem also reiterated the logic behind Kuwait's decision to abandon the dollar peg in favour of a currency basket last May.

'This helps in lowering the impact of severe fluctuations in prices of major international currencies on local inflation,' he said. - Reuters