UPDATE 1-Kuwait FinMin: debtors' bailout may cost $2.61 bln

Tue Apr 2, 2013 6:28am EDT

DUBAI, April 2 (Reuters) - A government bailout of Kuwaiti debtors is expected to cost 744 million dinars ($2.61 billion), finance minister Mustapha al-Shamali said on Tuesday.

The government, under pressure from members of parliament, is discussing with lawmakers a plan to write off the interest on Kuwaiti citizens' personal bank loans taken out before the end of March 2008.

"This is an issue that will be raised tomorrow in parliament," Shamali told reporters on the sidelines of a meeting of Arab finance ministers and central bankers in Dubai.

Asked what the total size of the bailout would be, he replied: "744 million dinars. The payment mechanism is that they will pay their debts all the way directly to the government."

The parliament gave initial approval to a bill last month, under which the government would buy the loans from banks, pay off the interest and reschedule the loans.

The bill still needs a second approval and the cabinet has said changes were needed to the initial plan.

Many lawmakers elected in December made debt relief in the oil-rich state a priority of their campaigns. Economists have voiced concerns about the long-term sustainability of such measures.

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