Kuwait, a wealthy Gulf state with vast oil reserves, is grappling with a seemingly endless political crisis that is having a detrimental impact on its economy and basic services. Hospitals and educational institutions are in disarray, while political paralysis paralyses the country’s only fully elected parliament. The constant stand-offs between elected lawmakers and the ruling Al-Sabah family, which wields significant control over political life, have prevented reforms that could diversify the economy, resulting in repeated budget deficits and low foreign investment. Despite being home to seven percent of the world’s crude oil reserves and having one of the most robust sovereign wealth funds, Kuwait is struggling to implement a reform plan adopted in 2018.
Political Dysfunction Holding Kuwait Back
According to economist Justin Alexander, political dysfunction has kept Kuwait from reaching its full economic potential. The political paralysis has prevented the country from implementing painful reforms to control spending growth, generate non-oil revenue, diversify its economy, or invest in maintaining its oil production capacity. The stasis has led to mounting social woes and a general deterioration of public services. Kuwait has witnessed more than a dozen parliamentary dissolutions in its 61-year history, and the most recent one was last month when the constitutional court dissolved an opposition-controlled assembly over alleged electoral irregularities and reinstated the previous parliament.
Budget Deficits and Low Foreign Investment
Kuwait’s government resigned three months after it was sworn in in January 2022, causing further uncertainty about the country’s future. The country posted large deficits during the Covid-19 pandemic, and while it was buoyed last year by the rise in oil prices, which generate most of the state’s income, the budget deficit is expected to widen as prices stabilize. The caretaker cabinet submitted a draft budget for 2023-2024 that projects a deficit of more than $16 billion for the year starting in April 2023, compared to a surplus of $4.5 billion expected for the current year. Kuwait needs to diversify its economy, generate non-oil revenue, and invest in maintaining its oil production capacity to attract foreign investment and reduce its dependence on oil revenues.
Calls for a National Dialogue and a New Constitution
While the Kuwaiti government has promised to tackle state spending and fight corruption, its inability to pass reforms and make meaningful changes to the economy is taking a toll on Kuwaiti citizens. Kuwaiti academics and experts are calling for a national dialogue and a new constitution to address the country’s governance crisis. The country’s political dysfunction, failures of planning, and mounting social woes, including the deterioration of public services, are exacerbating Kuwaiti citizens’ problems. Kuwait needs to take decisive steps to reset its politics and implement reforms that can sustain its economic growth and improve its citizens’ lives.