Kuwait's Central Bank governor unveiled a $5.15 billion economic-stimulus package Sunday aimed at helping struggling investment companies and offering bank-loan guarantees.
Sheikh Salem Abdul-Aziz Al Sabah said the plan presented the best solutions possible at the lowest cost to the public to help struggling companies weather the global economic downturn. He said it would also help protect banks that he described as "the beating heart" of the economy.
The oil-rich state has been grappling with fallout from the economic downturn. The stock exchange lost 30 percent last year, a major commercial bank is grappling with difficulties and the country's largest investment company has defaulted on its debts and cut 10% of its work force.
Before Sabah spoke to reporters, little detail had been officially released about the package, which the cabinet approved Thursday. It still needs the approval of Kuwait's parliament, whose members have been pressing for a bailout package.
Sabah said he did not like to use the term "rescue" to describe the package, which he sees as a bill to "enhance financial stability." He said the state would help banks deal with loan losses and increase their capital according to stringent conditions, including cutting expenses and agreeing to possible mergers.
In addition, the plan guarantees 50% of future bank loans to companies that are going to invest the money locally.
"We expect [the bill] to generate a good measure of confidence in Kuwait," Sabah said, adding that the package will "reduce the risk of an economic recession."
He said the state would not help troubled companies that are not solvent.
Investors are worried about companies going bankrupt. Their fears are compounded with a decline in oil revenues and an estimated 35% loss to the country's $300b. sovereign fund.
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