Front Matter

Front Matter Page

IMF Country Report No.14/334

KUWAIT

SELECTED ISSUES

December 2014

This Selected Issues paper on Kuwait was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on November 5, 2014.

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Front Matter Page

KUWAIT

SELECTED ISSUES

November 5, 2014

Approved By

Alfred Kammer

Prepared by Mariana Colacelli, Fuad Hasanov, Inutu Lukonga, Ananthakrishnan Prasad, and Sergio Rodriguez. Juan Carlos Flores and Ben Piven provided research assistance and Diana Kargbo-Sical provided editorial assistance. The authors thank Sami Al-Anbaee, Waleed M. Al-Awadhi, Abeer A. S. Al-Sabti, and Cynthia Abdullah Al-Abdulelah of the Central Bank of Kuwait, Khalid Bassam Al-Hmoud, Mohammed El-Sakka and Abbas Al-Mejren of the Ministry of Finance, and Nico Valckx and Ivo Krznar from Monetary and Capital Market (IMF), for their useful comments.

Contents

  • DESIGNING AND IMPLEMENTING FISCAL POLICY FOR THE MEDIUM TERM

  • A. Introduction

  • B. Medium-Term Frameworks and Fiscal Strategy

  • C. Concluding Remarks

  • References

  • FIGURES

  • 1. Real Revenue and Spending, and Oil Price, 1985–2013

  • 2. Total Factor Productivity, 1970–2010

  • 3. GDP per Worker Relative to the US

  • 4. Number of Countries with Fiscal Rules, 1990–2012

  • 5. Type of Fiscal Rules, 2012

  • 6. Optimal vs. Projected Current Spending, 2014–19

  • 7. Optimal vs. Projected Investment Spending, 2014–19

  • TABLE

  • 1. Indicative Calendar for Main Stages in the Budget Process

  • APPENDIX

  • 1. The Main Components of the Fiscal Strategy

  • EFFICIENCY OF PUBLIC INVESTMENT IN KUWAIT—A PRELIMINARY ASSESSMENT

  • A. General Effectiveness of Public Spending

  • B. An Assessment of the Efficiency of Public Investment

  • C. Quality of the Public Investment Management System and Policy Recommendations

  • FIGURES

  • 1. Selected Indicators Helpful to Assess Effectiveness of Public Spending

  • 2. Perceived Government Effectiveness and GDP per Capital, 2013

  • 3. Public Spending on Health and Life Expectancy, 2012

  • 4. Public Spending and Enrollment Rates in Secondary Education

  • 5. Public Capital Stock and Quality of Overall Infrastructure, 2013

  • 6. Global Competitiveness Indicators, 2013

  • 7. Assessing Public Investment Efficiency: DEA and PFDH Methods

  • 8. Metro and Road Construction Cost Estimates

  • 9. Public Investment Management Index by Stages of Project Cycle

  • SMALL AND MEDIUM ENTERPRISES: PURSUIT OF GROWTH AND DIVERSIFICATION IN KUWAIT

  • A. Role of SMEs in Economic Development and Employment

  • B. Constraints Facing SMEs

  • C. Cross-Country Experience in SMEs Development

  • D. SMEs Development in Kuwait

  • E. Remaining Challenges

  • FIGURE

  • 1. SMEs Employment in Kuwait

  • KUWAIT ISLAMIC BANKING: AN ASSESSMENT OF STABILITY RISKS

  • A. Introduction

  • B. Overview of Kuwait’s Islamic Finance Industry

  • C. The Regulatory Framework

  • D. Financial Stability Issues

  • E. Conclusions

  • References

  • FIGURES

  • 1. Significance of Islamic Finance in Kuwait

  • 2. Sources of Income by Geography

  • 3. Balance Sheet Structure of Islamic Banks

  • 4. Balance Sheet and Stock Market Trends

  • 5. Barometer of Financial Soundness

  • TABLE

  • 1. Corporate Structure of Kuwait Islamic Banks

  • APPENDICES

  • 1. Ownership Structure of Islamic Banks

  • 2. Products Offered by Islamic Banks

  • 3. Descriptions of Islamic Financial Products

  • SHADOW BANKING IN KUWAIT

  • A. Definition and Size

  • B. Mapping Shadow Banking in Kuwait

  • C. Conclusions and Recommendations

  • References

  • BOX

  • 1. Risks from Shadow Banking

  • FIGURE

  • 1. Kuwait: Financial Sector

  • TABLES

  • 1. Financial Sector Structure

  • 2. Financial Sector and Shadow Banking, 2008–14

  • WHY IS MACROPRUDENTIAL POLICY (MAPP) IMPORTANT IN KUWAIT?

  • A. Introduction

  • B. Current Institutional Arrangements for MaPP in Kuwait

  • C. Current macroprudential toolkit in Kuwait

  • D. Strengthening macroprudential policy

  • FIGURE

  • 1. Oil Prices and the Kuwait Economy

  • TABLE

  • 1. Macroprudential Instruments in the GCC Countries

Kuwait: Selected Issues
Author: International Monetary Fund. Middle East and Central Asia Dept.