Loan waiver law in Kuwait.. wide controversy between the National Assembly and the government

Kuwait -

The issue of the state's purchase of citizens' indebtedness related to consumer and personal loans, or what is known as "loan waiver", sparked a wide controversy between the majority of the members of the National Assembly and the government on the one hand, and citizens on the other.

And it seems that matters are moving towards a greater escalation between the legislative and executive authorities, especially after the decision of the Financial and Economic Affairs Committee - in its meeting last Sunday - with the unanimous consent of its present members not to withdraw any report on the agenda of the National Assembly except by a decision of the Council.

And the committee’s rapporteur, Representative Saleh Ashour, announced in the National Assembly’s media center, according to the council’s website, that the committee discussed 7 reports on the agenda of the National Assembly regarding proposals to buy citizens’ debts, increase pensions for retirees, drop the benefits of illegal loans on citizens, and transfer Kuwait Airways Corporation To a joint stock company, to establish a company to market agricultural crops, to reduce the rate of deduction for good loan installments from 15% to 5%, and to amend the law establishing the Chamber of Commerce and Industry.

He explained that the committee decided not to withdraw any report on the agenda, unless radical and legal amendments were submitted to the proposals presented to the Council, and that the withdrawal take place with the approval of the Council.

And the Finance Committee in the Kuwaiti National Assembly had previously approved, on December 15, the state’s purchase of citizens’ debts related to consumer and personal loans, and the deduction of a cost-of-living allowance of 120 dinars until the end of the loan, and that joining the law be optional for those who wish to do so, in addition to approval To recover illegal interest on citizens’ loans that were decided upon through rulings issued by the Kuwaiti judiciary, and to raise the minimum pension and increase it for segments whose salaries range from one thousand to 1,500 dinars.

(Kuwaiti dinar = 3.27 dollars).

There are many loans that proved illegal to charge interest on, and in this regard, 125 million were recovered from local banks for the benefit of citizens.

Ashour: The Finance Committee discussed 7 reports on the agenda of the National Assembly (Kuwaiti press)

face the fiscal deficit

For its part, the Kuwaiti Ministry of Finance revealed, in its final accounts, that the financial situation during the fiscal year 2021-2022 improved significantly, as the government recorded a deficit of 3 billion dinars (7.2% of GDP), which is much less than the record deficit. amounting to 10.8 billion (33.3% of GDP), recorded in the budget of the previous fiscal year, whose results were affected by the Corona pandemic.

She added that the blurring of the economic scene requires a meeting of the executive and legislative bodies to discuss a crisis of this magnitude, and to reach a clear picture and solutions that satisfy the people.

the available choices

The Kuwaiti government seeks to study the reports of parliamentary committees, before presenting its constitutional and financial opinion regarding them, and justified its withdrawal from the National Assembly session on Tuesday before last and its failure to attend the Wednesday session.

And she explained, in a statement after an extraordinary meeting to study the available options, that she requested that the reports be returned to the committees in order to reach solutions that achieve the goals contained in their work program.

In turn, Minister of Finance and Minister of State for Economic Affairs and Investment Abdul Wahhab Al-Rasheed stressed that buying citizens' loans will negatively affect public money and violate the principle of justice and equality stipulated in the Constitution of the State of Kuwait.

He talked about the existence of caveats related to the legal aspects of implementing such proposals, in addition to its impact on the banking sector's performance, governance standards, and monetary and financial stability.

Al-Rasheed: Buying citizens' loans will negatively affect public money (Kuwaiti press)

Wages adjustment

For his part, economist Ibrahim Al-Failakawi believes that the issue of debt forgiveness is not fair, but the matter is old and has been repeated more than once. The government had previously forgiven the hard debts of merchants without looking at the debts of citizens, then this was repeated in 1991 after liberation, when the government canceled all debts. About merchants and citizens, and then touched on dropping debts or finding solutions to them through the Insolvent Fund and scheduling loans, which gave many citizens the opportunity to reschedule their debts and try to pay off debts and also adjust their wages and salaries.

It is noteworthy that Kuwait issued Law (28) for the year 2008 and Law (51) for the year 2010 regarding the establishment of a fund to address the situation of citizens who are unable to pay consumer and installment loans to banks and investment companies.

Al-Failakawi believes that the process of dropping loans will have negative effects on the Kuwaiti economy, but the government - according to his opinion - has unfair expenses - as he put it - such as its attempt to include the debts of merchants or granting exceptional salaries to some leaders, and all of this will affect the state's budget negatively, as consumer loans to citizens It does not exceed two billion dinars, and this figure is not large compared to the large burdens borne by the general budget in other matters.

As for the solutions to get out of this impasse (forgiving loans) and closing his file, there are many - according to Al-Failakawi's opinion - such as adjusting the level of wages that have not been increased for many years, and this affected citizens because of the high cost of living, and he said that raising wages will achieve greater justice between Citizens.

Help only those affected

As for the head of the Anti-Corruption Association, Nawaf Meshaal Al-Suwait, he believes that not all members of the National Assembly tend to drop the loans, but they raise the matter to remove the embarrassment from some of them, and if they were honest, it would have been settled.

And he believes that the law in which it was presented is a big mistake, because it should be to help those affected by the loans, and here only the affected will benefit and not all borrowers, until justice is achieved among all, so whoever gets a salary of 3 thousand dinars does not deserve to be forfeited at all.

He said that there should be a clear text in the law that the one who lives on his salary only benefits from debt forgiveness, and not the one who has a source of income.

Al-Suwait said - to Al-Jazeera Net - that the process of dropping debts in the same way that it was presented is not possible, because that bears the state 23 billion dinars, but if the claims go to the real affected people, then here the matter will differ because the amount will not constitute a great burden on the state.

As for solutions, Al-Suwait said we have a plan that we will present in the coming days to the responsible authorities that will kill two birds with one stone, by dropping loans from those affected only and increasing salaries for those who did not borrow or who did not benefit from this law.

The Parliamentary Finance Committee in Kuwait approved the loan purchase law (Kuwaiti press)

prioritization

On the other hand, the head of the Kuwaiti-Human Friendship Society, Ahmed Al-Sarraf, believes that dropping loans is a "crime", and wondered how it is possible to accept the idea of ​​spending 50 billion dollars in one day of public money on a group of borrowers, 85% of whom have borrowed in the past three years only, With their hearing of the council and government's intention to drop loans, the Central Bank of Kuwait has all the data for that.

In his interview with Al-Jazeera Net, he said that the default rate among the 550,000 borrowers in Kuwait is much lower than the international average, and does not exceed 2%.

Al-Sarraf believes that instead of disbursing $50 billion to pay off loans, it should be spent to improve the lives of citizens and residents in countries, by raising the level of education, improving medical and treatment services, repairing dilapidated roads, and raising the level of environmental cleanliness.

It is noteworthy that the Central Bank of Kuwait revealed - in a statement issued on the sixth of January - that the number of Kuwaitis obtaining consumer and installment loans from all creditors, "banks, investment companies and financing companies", amounted to about 550 thousand borrowers, and indicated that the portfolio Loans provided to citizens totaled 14.7 billion dinars, divided into 13 billion dinars as housing loans, and 1.7 billion dinars as consumer loans.

And the Central Bank indicated that the percentage of citizens who defaulted on repaying these loans is about 2.3% of the total number of borrowers, or about 12.65 thousand borrowers.

The bank indicated that the degree of regularity in repaying loans by citizens is about 97.5% of the total value of loans/financing.