The emir of Kuwait urged the cabinet and parliament on Tuesday to cut state spending in response to slumping oil prices, warning that any delay would increase the damage to the government's finances. The remarks by Sheikh Sabah Al-Ahmed Al-Sabah, in a speech to parliament, appeared to be an effort to prepare the ground for politically difficult economy measures such as cuts in energy and food price subsidies, which could occur next year. "There must be speedy, serious and urgent measures to complete the economic reforms and attain their objectives, namely with slashing the public spending," the emir said, according to a report on the state-run Kuwait News Agency. "While I declare in front of you facts and ramifications of the crisis, I ask the government and the assembly to take urgent reform measures." Global prices have fallen by more than 50 percent since the middle of last year. While Kuwait and some other Mideast countries have sizeable reserves, continuing low prices could put them under increased pressure. "Oil prices have caused state income to drop 60 percent, but public spending has not been cut, causing a state budget deficit which is a burden on our development aspirations," he said. He asked the cabinet and parliament to adopt "urgent reform measures" that would include spending reductions and efforts to find non-oil sources of income. Kuwait posted a budget deficit of 1.094 billion dinars ($3.6 billion) in the five months through Aug. 31, after a payment into the Future Generations Fund, which is part of its sovereign wealth fund, official data shows. That amount is small compared to the country's huge fiscal reserves, and Kuwait is better able to cope with cheap oil than most of the Gulf Arab oil exporters. Nevertheless, officials say the plunge of oil prices means the country must go ahead with long-delayed fiscal reforms. A range of subsidy cuts is under consideration - local media reported this week that domestic gasoline prices might almost double, though they would remain among the lowest in the world - and the government has said it plans eventually to impose corporate tax on local firms. Such changes could arouse complaints among the public and in parliament, which has often had tense relations with the cabinet which have slowed or blocked economic reforms. Kuwait's parliament is the most independent and assertive among the Gulf monarchies. Sheikh Sabah said he did not want Kuwait to run down its Future Generations Fund. Including this and other assets, the sovereign wealth fund is estimated to be more than $500 billion in size.
