x Abu Dhabi, UAESaturday 22 July 2017

Long-serving Kuwait central bank chief resigns

Kuwait's central bank governor stepped down yesterday in protest at the government's big spending rises.

Sheikh Salem Abdulaziz Al Sabah, the governor of Kuwait's central bank.
Sheikh Salem Abdulaziz Al Sabah, the governor of Kuwait's central bank.

Kuwait's central bank governor resigned yesterday in protest at what he views as the country's spendthrift policies.

Sheikh Salem Abdulaziz Al Sabbah, who spent more than 25 years at the helm of the regulator, said "unprecedented" increases in public spending meant the regulator was no longer able to meet its responsibilities.

"The challenge of current local economic conditions and forecast growth in public expenditure has reached a point where it would prevent the [central bank] from carrying out its duties as stated in the bill of its establishment," he was quoted as saying in an interview with the Kuwait News Agency (Kuna).

Despite receiving support for his efforts, government action had yet to be taken to steer monetary policy towards economic reform, the news agency quoted him as saying.

Sheikh Salem's departure follows a series of huge public-sector pay rises after workers staged strikes and protests last year. Kuwait's government plans to raise spending by 11 per cent in the fiscal year ending next month to a record 19.44 billion dinars (Dh257.46bn).

The spending increase raised risks for the economy, even if the outlay was underpinned by temporarily high oil prices, Kuna reported Sheikh Salem as saying.

Sheikh Salem and other leading Kuwaiti economic policymakers had been urging the government to restrain spending as oil prices rose last year.

But their pleas were drowned out by political turmoil and accusations of corruption against senior politicians.

"Kuwait's policymaking environment is more problematic than any of the other Gulf states, and the governor's departure is unlikely to lead to a significant shift in policymaking," said Simon Williams, the chief economist of HSBC in the Middle East and North Africa.

Sheikh Salem had earned a reputation as a reformer during his leadership. He was behind Kuwait's decision in 2007 to become the first GCC state to abandon the US-dollar peg in an effort to fight inflation. Instead, the Kuwaiti dinar is pegged to a basket of currencies, believed to be heavily weighted in dollars.

Sheikh Salem is the second GCC central bank governor to leave his post in recent months. In December, Muhammad Al Jasser left his post at the helm of Saudi Arabia's central bank to become minister of economy.

 

tarnold@thenational.ae