Kuwaiti Economic Society calls for subsidy reform to boost efficiency

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KUWAIT CITY, July 14: The government support provided by the State of Kuwait plays a crucial role in its social policy, aiming to enhance citizens’ quality of life and alleviate financial burdens. However, there are ongoing discussions about improving the efficiency of this support to ensure it reaches those who truly need it. Proposals include transforming this support into a social safety net, akin to systems in other Gulf countries, which primarily involve direct cash transfers to citizens, ensuring targeted delivery to deserving recipients.

Muhammad Al-Jouan, Vice President of the Kuwaiti Economic Society, emphasized that accurately directing and discussing the costs of subsidies is fundamental. He stressed that focusing on expenditure size and halting excessive budgetary waste are primary priorities for comprehensive reform. Al-Jouan highlighted that any meaningful reform must begin by addressing the economic realities faced by citizens, who often bear the brunt of financial pressures before these issues become politically significant.

In an interview with Al-Seyassah newspaper, Al-Jouan proposed establishing a specialized body for social security, parallel to the Zakat House, with investment rights. He suggested funding this safety net sustainably through corporate taxes. Al-Jouan disclosed that subsidies in the 2024- 2025 budget are projected to cost 600 million dinars, with expectations that this figure could rise to 900 million dinars. Regarding the fairness of the current support system, Kuwait has a longstanding tradition of social solidarity dating back to the 1960s.

However, as demographic changes and economic challenges evolve globally, there is a growing need to update and modify these systems to better serve current realities and ensure equitable distribution of support. The cost of subsidies in the 2024-2025 budget is estimated at 600 million dinars, assuming an oil barrel price of $70. This figure could rise to 900 million dinars based on expenditures outlined in the 2023- 2024 fiscal year. This potential increase, if approved, would not exceed 160 to 200 million dinars compared to the staggering waste in the budget, which amounts to around 3 billion dinars. Regarding fuel subsidies, the primary concern lies not in the political debate over government-declared fuel prices, but in discussing the precise costs and the importance of directing subsidies effectively. This approach is fundamental; everything else is secondary.