DUBAI: The International Monetary Fund (IMF) said that it had a positive outlook for the economy of Kuwait. In a statement from the IMF's Executive Board, it said that Kuwait was “broadly positive” for the economic progress it expected this year. The board said the country's economic recovery is expected to strengthen, led by high government expenditure – particularly wages and capital expenditure. “High fiscal and external surpluses are expected to persist,” the statement argued. “Inflation is projected to moderate slightly due to a decline in global food inflation. Low implementation rates of the capital budget and legislative bottlenecks could, however, dampen the recovery.” It called on the Gulf country to maintain its current economic policies to keep its fiscal balance stable. “Inflation is projected to remain low, but inflation risk is on the upside and the authorities should be ready with a strategy for fiscal adjustment if inflationary pressures build up,” the IMF said. “This strategy should safeguard the capital budget as much as possible.” The board did say that Kuwait has “significant fiscal space” to boost its wealth in the coming years and to maintain levels of growth for future generations. “In this connection, the authorities are encouraged to improve the government's capacity to implement the capital budget, contain the growth of the public sector wage bill, avoid a further buildup of the pension system's unfunded liabilities, and avoid new measures that would further increase current expenditures,” the IMF said. The introduction of a VAT would be a “step forward,” the IMF board said. The adoption of a medium-term budget framework and a well-designed fiscal rule could improve fiscal management. “Finally, the phased retargeting of fuel-related subsidies to the most vulnerable segments of the population should be part of a medium- to long-term fiscal reform program.”
