Kuwait props up coronavirus-hit economy amid low oil prices

KUWAIT (Reuters) - Kuwait announced measures early on Wednesday aimed at shoring up its economy against the coronavirus pandemic, including soft long-term loans from local banks, and the central bank asked banks to ease loan repayments for companies affected.

Kuwait, which as of March 31 had registered 289 coronavirus cases, was the first Gulf state to halt passenger flights and impose a partial curfew to stem the spread of the highly infectious respiratory illness.

The sectors most impacted by the pandemic include aviation, hospitality and real estate, a government source told Reuters.

The stimulus package approved by the cabinet aims to provide liquidity for small- and medium-sized enterprises to meet their obligations, a government spokesman said.

That includes directing government agencies to pay obligations to the private sector as soon as possible.

The central bank separately has asked lenders to postpone loan repayments for three months for companies hit by the crisis, the governor, Mohammad al-Hashel, said in a television interview posted by the central bank on Twitter.

Kuwait is also dealing with the impact of lower oil prices on its finances that is expected to lead to a higher government fiscal deficit this year.

The government source said that, in light of the oil price fall, passing a debt law allowing Kuwait to borrow more has become a “government priority.”

Kuwait has drawn down on its state fund, the General Reserve Fund, to cover its deficit. The source said the government withdrew 43.8 billion Kuwaiti dinars ($139.70 billion) in the five years until the 2018-2019 fiscal year, and 3.7 billion dinars in the 2019-2020 fiscal year.

This means the fund has around 14 billion dinars ($44.65 billion) left, the source said.

Moody’s this week placed Kuwait’s Aa2 rating on review for a downgrade, citing a “significant” decline in government revenues.

The government spokesman said maintaining Kuwait’s credit rating was one of the goals of the new economic measures.

($1 = 0.3135 Kuwaiti dinars)

Reporting by Ahmed Hagagy in Kuwait and Ahmed Tolba and Nayera Abdallah in Cairo; Writing by Davide Barbuscia; Editing by Mark Heinrich and Stephen Coates