Kuwait's central bank plans to cut its benchmark rate by 50 basis points to 3 percent on Thursday to help spur lending to support growth in non-oil sectors in the Gulf economy facing a contraction this year.

The central bank of the world's fourth-largest oil exporter last reduced the discount rate, which guides bank lending and deposit rates, a month ago by 25 basis points.

Thursday's reduction will be Kuwait's fifth since October, taking the total discount rate cut to 275 basis points.

'There is an increasing need at this stage to consolidate the appropriate environment to reinforce growth in non-oil sectors of the national economy by reducing the cost of financing,' said Kuwait Central Bank Governor Sheikh Salem Abdul-Aziz al-Sabah.

The comments carried by state news agency KUNA did not specify whether the central bank had also decided to cut its repurchase rates.

Since the global financial crisis deepened late last year, Gulf oil exporters, including Saudi Arabia, have taken a number of steps to unlock credit markets, including in the case of Kuwait bank deposit guarantees and state equity investments.

Kuwait was forced to rescue Gulf Bank from collapse last October after it recorded steep derivatives losses.

The Opec oil exporter, which relies on revenues from crude for more than 90 per cent of revenues, is facing the sharpest contraction in the Gulf region of 1.1 per cent this year, the International Monetary Fund said this week.

While liquidity conditions have improved across the Gulf, banks have been cautious about extending new loans as they face concerns about growing defaults to taking precautionary provisions.

Kuwait's government pushed through an economic support package by decree earlier this year that is designed to enable banks to lend about 4 billion dinars ($13.81 billion) in the coming two years.

The plan, which would cost the state 1.5 billion dinars, includes state guarantees of up to 50 percent of new loans.-Reuters