Study calls to end subsidies for Expatriates

KUWAIT: Expatriates in Kuwait could soon find themselves paying triple for petrol and up to 22 times as much as they currently pay for electricity, if the government approves a recent study to remove access of foreigners to subsidized services. The study proposes eliminating subsidies on fuel used by expatriates and sharply reducing electricity subsidization to make foreigners pay the market price for the majority of their energy consumption, Al-Rai reported yesterday, quoting ministerial sources familiar with the proposal.

The study is one of many currently reviewed by a ‘ministerial committee’ formed earlier to study ways by which subsidies can be rationalized. Kuwait has been mulling ways to reduce current expenditure amid concerns that the state could face a budget deficit by 2021 as a result of its spending policies.

Kuwait’s generous welfare system is regularly mentioned in debates about finding ways to rationalize spending. Cutting subsidies, which currently reach KD 7 billion in the national budget, or limiting access to subsidized goods and services only for Kuwaitis, have been proposed in recent months as a way to help reduce spending while at the same time maintain a sustainable welfare program for citizens.

Kuwait charges consumers 2 fils per kilowatt of electricity that costs the state around 47 fils to produce. Subsidization has allowed Kuwait to maintain one of the world’s cheapest electricity and water rates for decades, which created an overconsumption problem in recent years. But the debate about removing energy subsidies surpasses its effect on saving energy, and reaches a discussion on the ability of foreign workers – a majority of whom are paid less than KD 200 a month – to survive once the decision becomes a reality. For example, removing electricity subsidization means that an expatriate who pays an average of KD 25 a year will have to pay KD 550.

The decision would also likely end a common tradition by apartment buildings to include electricity and water charges into the rent and paying the ministry on tenants’ behalf. As for fuel, selling gasoline for its actual price would increase expatriates’ bills 2.5 to 3 times, which means that if someone spends an average of KD 200 annually on petrol, he will have to pay between KD 500 and KD 600 if subsidies are removed. The study does not leave out Kuwaitis, who under the proposed measures will have limited access to subsidized services.

The proposal calls for studying Kuwaitis’ monthly consumption patterns and come up with categories for charges paid. Payment would still start at the current rate of 2 fils per 1 kilowatt, but increase gradually the more energy is consumed. The same criteria is to be followed for fuel, as the study proposes allocating ‘specific quotas’ of subsidized gasoline under which a Kuwaiti driver would have to pay more if he or she exceeds their designated quota. The study also calls for removing subsidies on diesel completely, since this type of fuel is only used by companies in Kuwait.

The committee is set to discuss the study during a meeting chaired by Minister of Finance Anas Al-Saleh. The debate will focus on its economic and social impact on citizens and expatriates alike. The panel understands that that this proposal will result in inflation and salary increase demands by a majority of expatriates in Kuwait, according to the sources who spoke on the condition of anonymity.

The minister of electricity and water had announced earlier this month that a proposal is being mulled to remove subsidies from some categories of consumers. He clarified at the same time that middle class citizens and those with low income will not be affected. — Al-Rai

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