* Kuwait needs to focus on investment
* Rate settings appropriate
* Sees growth of around 6.5-6.6 percent this year
By Martin Dokoupil and Sylvia Westall
KUWAIT, Oct 1 Kuwait's government should take
all necessary measures to cut spending and focus on investing in
projects that will benefit the major oil producer's economy in
the long-term, Central Bank Governor Mohammad al-Hashel said on
Hashel, who took over at the central bank in March, said he
shared his predecessor's concern about high government spending
in the Gulf Arab state.
"We think it (government spending) is very high and we
should take all the necessary actions to reduce (it)," he told
Hashel, who spoke after a meeting of Arab central bank
governors in Kuwait, said current monetary policy settings were
in line with economic developments.
"We think: sure," he said, when asked whether current
setting were appropriate. "Otherwise if we think it needs any
movement or amendments or changes we will not hesitate to take
any necessary actions," he said.
He said growth of the OPEC member's economy this year
depended on oil prices and production. It could grow 6.5-6.6
percent this year, he said, in some of his first comments to
Hashel replaced veteran policymaker Sheikh Salem Abdul-Aziz
al-Sabah, who headed the central bank for 25 years before
resigning in March. Sheikh Salem was concerned about Kuwait's
dependency on oil for revenues.
Kuwait booked a record budget surplus of 13.2 billion dinars
($47 billion) in the fiscal year that ended in March thanks to
robust oil income and lower spending than planned.
But economists and policymakers have said the government's
expenditure on wages and benefits is not sustainable in the
long-run and that the economy could face problems if there is a
steep drop in the oil price.
The International Monetary Fund said in May that Kuwait
risks exhausting all of its oil savings by 2017 if it keeps
spending money at the current rate.
In a bid to invest more efficiently, Kuwait announced last
month that it would more than double the portion of revenues it
puts into a rainy day fund for when oil runs out or the economy
faces severe shocks.
A long-running political crisis has held up investment,
especially in large infrastructure projects, allowing the budget
surplus to grow. A 30 billion dinar ($107 billion) development
plan aimed at boosting and diversifying the economy has stalled.