Liquidity crisis is forcing government institutions to take unusual action – ARAB TIMES







KUWAIT CITY, November 20: Figures that have been released by the Kuwaiti Ministry of Finance show a decline in state current account profits of about 91.5% at the end of fiscal year 2020-2021, or about 306,000 dinars, against 3.6 million dinars in 2019-2020, reports the daily Al-Qabas. This situation, according to the sources, is due to the decline in income from current account profits due to intense withdrawals to finance various operations and provide liquidity to be spent on the items mentioned in the general budget, at a time when the income have sharply decreased, which is directly linked to the downward trend in oil prices and the impact of the repercussions of the Covid-19 pandemic.

Measures
The same sources indicated that the liquidity crisis forced some government institutions to take unusual measures after the finance ministry allocated cash only to necessary items of the budget, especially salaries and subsidies, forcing some branches to increase the frequency of withdrawals from their bank. accounts to fund their operations. With oil prices stabilizing at relatively moderate levels in recent months – above $ 80 a barrel – sources expect bank balances to “swell” again over the next few months and bank balances. Government accounts increase again by the end of the 2021-2022 fiscal year.

According to figures recently released by the Central Bank of Kuwait, deposits of government institutions increased by 360 million dinars in August, for the first time since the beginning of this year, after being subject to withdrawals. monthly since the beginning of the year. , either for reasons linked to the change in the investment strategy of certain government institutions, or because of the need to finance some of their projects. Total deposits in local banks jumped from 492 million dinars to 44.3 billion dinars, with a share of 7.3 billion dinars for state deposits, against 35 billion dinars for government deposits. private sector. Since the budget of the last fiscal year recorded a historic deficit figure of around 10.7 billion dinars, government agencies have mobilized under pressure from the Ministry of Finance, and they have started to take measures. strict measures, both at the level of providing liquidity, or at the level of the rationalization of expenditure on the various budget items, including the postponement of the examination of requests for a capital increase of one of the parties during the period current.

Payments
This is in addition to the postponement of many payments to contractors, when exchange operations were limited to only wages and necessary items. As the fiscal crisis worsened, the period of low oil prices extended, the government resorted to several solutions in the last period to maintain levels of liquidity in the general reserve sufficient to pay wages and urgent obligations month by month, whether by swapping assets between the general reserve and “generations” or by stopping the deduction of a 10% percentage of oil revenues go to the Future Generations Fund, but all these solutions remain temporary and unsecured in the event that laws favoring liquidity and the transition to financial sustainability have not been passed.







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