Saturday, March 28, 2009

Kuwaiti Government Approves $5.2 Billion Stimulus Package

Sources: Kuwait Finally Approves $5.2bn Stimulus, Financial Times; Kuwaiti Cabinet Approves $5.2b Stimulus Package, MENA Financial News; Kuwait Approves $5.2 Stimulus, Gulf News; Kuwait Recovery Tied to Stimulus Package: HSBC, Kuwait Times; Kuwait Dissolves Parliament, Sets May Election, Reuters

The Kuwaiti cabinet finally passed a $5.2 billion economic stimulus package on Thursday. After weeks of delays due to a standoff with parliament, the cabinet was able to put the plan proposed by the Central Bank into action after the emir dissolved parliament on Wednesday. The dissolution of parliament enabled the outgoing cabinet to go ahead with urgent bills—like this one—without approval from parliament.

The cabinet approved the bailout plan to aid the country’s fledging financial firms. The plan is designed to enable banks to lend about $13.86 billion within two years, of which the government would guarantee up to fifty percent to encourage lending. The government also plans to increase liquidity by purchasing unsubscribed stock—newly issued securities that have not seen much interest from investors or have not been offered by brokerages.

Investment firms, which make up more than half of all listed firms on the Kuwaiti bourse, are welcoming the package with open arms, as they had been appealing to the government to approve the stimulus package for weeks.

Kuwait has been hit hard by the current economic crisis and is an illustration of the expansive reach of the global credit crunch. However, as of yet, it is the only Gulf country that has had to step in to save a big bank.

1. Does the dissolution of parliament strip legitimacy away from this economic stimulus bill? Was it a necessary move? What could the U.S. Administration do if, hypothetically, Congress crippled any attempts at stimulating the economy? Should they be able to do anything?
2. Why do you think that Kuwait has seemingly been hit harder than the other Gulf states?

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