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The Deepening Political Crisis:
Kuwait’s Government Resigns Again

by Sophie Smith

Just three months after its formation, Kuwait’s government resigned amid a deepening political crisis. On 5 April 2022, Prime Minister Sabah Khaled Al-Sabah, who had been in power since 2019, submitted the Cabinet’s resignation to Crown Prince Meshal Al-Ahmad Al-Jaber Al-Sabah.[i] It came ahead of a non-cooperation motion in parliament after the opposition had been mounting against the Premier over alleged ‘unconstitutional’ practices, including corruption and mismanagement.[ii] Lawmakers labelled him as unsuitable, advocating for a new Prime Minister to address the country’s problems and implement overdue reforms. It signals a deepening political crisis that has led to an impasse on critical economic and social reforms.

 

The Gulf’s Most Active Parliament

 

In just over a year and a half, Kuwait has witnessed the collapse of three Cabinets. The phenomenon, however, is nothing new to Kuwait, whose parliament is regarded as one of the liveliest and most powerful in the Gulf region. The parliament has the prerogative to pass and block laws, question ministers and submit no-confidence motions against senior government officials, to name a few. While political parties are outlawed, the parliament is shaped by political groups that represent a wide spectrum of positions, frequently resulting in clashes that have led to government reshuffles and dissolutions of parliament.[iii]

 

To address this political deadlock, Kuwait had launched a national dialogue with MPs in November 2021 amid the second-to-last government resignation to foster unity and solve the political paralysis.[iv] It managed to address certain points of contention with the opposition, including a special amnesty to exiled opposition members.[v] Plus, the resulting cabinet included three opposition MPs – which was not the case in the previous one.[vi] Yet, ultimately, the initiative failed to solve the deep-rooted political divisions. Already earlier this year – ahead of the latest collective resignation – the Defence and Interior Ministers submitted their resignations, citing the political atmosphere and inability to pass reforms, while the Foreign Minister was subject to a vote of no confidence in the Parliament (which he survived).[vii]

 

The Spillover from the Political Deadlock

 

In this context, the latest resignation in April comes as the cabinet was unable to pass economic and social reforms that are becoming ever more critical. This is indicative by Fitch Ratings’ recent decision to downgrade Kuwait’s credit rating from ‘AA’ to ‘AA-’ in January due to ‘ongoing political constraints’ that have obstructed its ability to address structural issues related to ‘heavy oil dependence, a generous welfare state and a large public sector,’ as well as to pass a debt law.[viii]

 

Kuwait’s government has yet to renew its public debt law after the latest one expired in 2017. As a result, the Gulf state has not been able to access its sovereign wealth fund or borrow – vital especially in times of economic downturns when deficits rise. Instead, the government has been depending on alternate sources of funding, including assets swaps between the treasury and its sovereign wealth fund.[ix] However, such options are not sufficient to address the near decade long budget deficit that hit 12% in 2021 amid the COVID-19 pandemic and low oil prices. [x] Even with the current high oil prices, which are projected to reduce said deficit to 3.1% in 2022, a debt law will still be essential in the long run.[xi]

 

On that note, the deficit has also highlighted the country’s inability to enact legislation and initiatives that would help alleviate its fiscal position and accelerate its development. Kuwait has been slow to materialise its much-needed diversification efforts. It remains heavily reliant on revenues from fossil fuels, with oil accounting for 83% of its revenues in 2021 and is projected to reach 89% in 2022.[xii] And, it generates little to none from taxes as it has no income tax nor value-added tax (VAT), for example – the only tax is the corporate income tax imposed on companies with foreign ownership.[xiii] Such revenues are coupled with a large government expenditure, which is chiefly a result of Kuwait’s expansive welfare system and public sector. Kuwaitis benefit from numerous allowances and subsidies in education, energy, health care, water and housing, to name a few.[xiv] And roughly 85% of Kuwaiti nationals are employed in the public sector, which is regarded as more attractive than the private sector.[xv] Accordingly, the country’s expenditure consists overwhelmingly of salaries and subsidies, making up 72% in 2021 and projected to grow to 75% in 2022.[xvi] Beyond this, Kuwait’s lack of liquidity has also limited it in investing in projects to update its infrastructure or education and health systems.[xvii]

 

With all these concerns in mind, there is an urgent and growing need to implement reforms and generate investment in the country. Yet, there is little hope amid growing public disillusionment with the country’s political system. To that end, the next government, once formed, will face mounting challenges in introducing critical reforms as it navigates difficult relations with the country’s National Assembly. Such political differences, however, must be placed aside to tackle the existing economic and social challenges. Only time will tell whether the next government will bring any change and overcome the never-ending struggle between the legislative and executive branches that has rendered the government ineffective at times. It is certainly not an easy task but is vital to ensure crucial reforms are enacted to facilitate the country’s progress and development.

 

14 April 2022

 

References

[i] Kuwait News Agency, ‘Speaker Al-Ghanim: Tomorrow’s session cancelled after Kuwait PM submits resignation,’ Kuwait News Agency, April 5, 2022. https://www.kuna.net.kw/ArticleDetails.aspx?id=3033389&Language=en.

[ii] Kuwait News Agency, ‘Kuwait’s Prime Minister says he understands MPs’ the right to grill,’ Kuwait News Agency, March 29, 2022. https://www.kuna.net.kw/ArticleDetails.aspx?id=3032586&language=en.

[iii] Kuwait National Assembly, ‘About KNA,’ National Assembly, n.d. http://www.kna.kw/clt-html5/about-enk.asp; Sophie Smith, ‘An Overview of the GCC Countries' Parliaments,’ Euro-Gulf Information Centre, November 20, 2020. https://www.egic.info/overview-gcc-countries-parliaments; Gerald Power, ‘Kuwait’s Electoral Rollercoaster: The al-Sabah, the National Assembly and Gulf Democracy,’ Euro-Gulf Information Centre, December 3, 2020, https://www.egic.info/kuwait-electoral-rollercoaster.

[iv] Kuwait Times, ‘Kuwaiti political groups, MPs welcome Amir’s call for dialogue,’ Kuwait Times, November 29, 2021. https://www.kuwaittimes.com/kuwaiti-political-groups-mps-welcome-amirs-call-for-dialogue/.

[v] Luai Allarakia, ‘Despite Crisis-Easing Amnesty, Gridlock Remains a Real Possibility in Kuwait,’ Arab Gulf States Institute in Washington, December 7, 2021. https://agsiw.org/despite-crisis-easing-amnesty-gridlock-remains-a-real-possibility-in-kuwait/.

[vi] Kuwait News Agency, ‘Kuwait announces formation of new gov’t,’ Kuwait News Agency, December 28, 2021. https://www.kuna.net.kw/ArticleDetails.aspx?id=3019243&Language=en.

[vii] Kuwait News Agency, ‘Kuwaiti parliament renews confidence in foreign minister,’ Kuwait News Agency, February 16, 2022. https://www.kuna.net.kw/ArticleDetails.aspx?id=3026111&Language=en; Kuwait News Agency, ‘Amiri Decree issued accepting resignations of Defense, Interior Ministers,’ Kuwait News Agency, February 17, 2022. https://www.kuna.net.kw/ArticleDetails.aspx?id=3026272&language=en.

[viii] Fitch Ratings, ‘Fitch Downgrades Kuwait to 'AA-'; Outlook Stable,’ Fitch Ratings, January 27, 2022. https://www.fitchratings.com/research/sovereigns/fitch-downgrades-kuwait-to-aa-outlook-stable-27-01-2022.

[ix] Ahmed Hagagy, ‘Kuwait owes public entities 2.35 billion dinars, finance ministry says,’ Reuters, February 22, 2022. https://www.reuters.com/markets/rates-bonds/kuwaiti-govt-owes-public-entities-235-bln-dinars-finance-ministry-2022-02-22/.

[x] Ministry of Finance, 23/22 Budget (Kuwait: Ministry of Finance, 2022). https://www.mof.gov.kw/MofBudget/PDF/Budget22-23presentation-eng.pdf.

[xi] Ministry of Finance, 23/22 Budget.

[xii] Ministry of Finance, 23/22 Budget; Ministry of Finance, 22/21 Budget (Kuwait: Ministry of Finance, 2021). https://www.mof.gov.kw/MofBudget/PDF/Budget22-21eng.pdf.

[xiii] KPMG, ‘Kuwait,’ KPMG, January 2021. https://home.kpmg/xx/en/home/insights/2021/07/kuwait-thinking-beyond-borders.html.

[xiv] Ministry of Finance, 22/21 Budget.

[xv] Arab Times, ‘44% Kuwaitis work in public, private sectors; Indians top list, Egyptians 2nd,’ Arab Times, July 25, 2021. https://www.arabtimesonline.com/news/44-kuwaitis-work-in-public-private-sectors-indians-top-list-egyptians-2nd/.

[xvi] Ministry of Finance, 23/22 Budget; Ministry of Finance, 22/21 Budget.

[xvii] Times of Kuwait, ‘Heavy rains once again bring Kuwait to a halt,’ Times of Kuwait, January 3, 2022. https://www.timeskuwait.com/news/heavy-rains-once-again-bring-kuwait-to-a-halt/; Kuwait Times, ‘Health situation in Kuwait,’ Kuwait Times, August 30, 2015. https://www.kuwaittimes.com/health-situation-in-kuwait/; Arab Times, ‘Education standard in Kuwait low despite KD2.4bn budget,’ Arab Times, July 11, 2021. https://www.arabtimesonline.com/news/education-standard-in-kuwait-low-despite-kd2-4bn-budget/.