Kuwait finance minister warns of wage growth threat

Reuters , Monday 14 Nov 2011

Kuwait relies on oil revenues for 90 per cent of its budget

Passengers mill around a signage declaring a strike by Kuwait Airways employees at the check-in area in Kuwait International airport on Monday.(Photo:Reuters)

Public sector wages in OPEC member Kuwait are equivalent to about 85 per cent of the country's oil revenues, its finance minister was quoted by state news agency KUNA as saying.

"This reflects the seriousness of the situation, if the rapid increase in wages continues," Mustapha Al-Shamali told parliament, citing a government statement, before the house approved financial benefits for teachers on Monday.

Oil income in the world's sixth largest oil exporter provides more than 90 per cent of its budget revenues.

Shamali added that wage increases posed a "real danger" to the state budget, and that a fast rise in spending might cause a budget deficit. The country might then have to lower the value of its currency, liquidate investments or make withdrawals from state reserves, he said.

Since 2004, Kuwait's budget spending has tripled to a record 19.4 billion dinars ($70.3 billion) planned for the 2011-12 fiscal year, which started in April, with expenditure on wages rising almost as fast.

Kuwait's ruler and its central bank governor called on the government this summer to correct imbalances in the oil-reliant economy and trim budget waste.

A string of strikes in Kuwait in the past several months has added to upward pressure on wages. Employees of the national airline briefly went on strike in late October; earlier in the month, customs service employees staged a two-day strike, halting oil shipments from ports.

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