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Kuwait '2008 pay hike inflationary'

Kuwait, July 18, 2008

Kuwait's decision to raise salaries for a second time this year to insulate its population from record inflation threatens to stoke it further, the Gulf state's finance minister has warned.

Kuwait's parliament passed a bill last month to boost state employee salaries by KD50 ($188.5) per month for Kuwaitis earning less than KD1,000, just four months after another salary rise for citizens.

'The KD50 will increase inflation,' Mustapha Al Shamali said. 'Every time spending increases, it rises, and every time oil prices go up it rises.' Inflation in Kuwait hit a record 10.14 percent in February - the latest available data - and stayed at about that level in the following two months, Shamali said.

'It is close to 10 percent,' he told Reuters, when asked about April's inflation rate. Kuwait severed its link to the US dollar in May 2007, saying the weakening greenback was stoking inflation by making some imports more expensive.

It has allowed the dinar to rise about 9 percent since then. The Gulf state's central bank has asked the government to rein in fiscal spending.

In its 2008/09 budget, Kuwait forecast record expenditures of KD19 billion ($71.62 billion).

In a report presented to parliament last month, Shamali warned that subsidies designed to offset the impact of inflation on Kuwaiti citizens were a 'great burden' on the budget.-Reuters




Tags: Kuwait | warning | pay hike | inflationary |

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