Kuwait Times

Published Date: January 07, 2010
By B Izzak, Staff Writer

KUWAIT: The National Assembly yesterday passed an historic law that requires the government to forgive close to two billion dinars of interest on debts of Kuwaiti citizens and reschedule the principal debt over at least 10 years. Thirty-five MPs voted for the controversial legislation in its second and final round of voting, 22 opposed it while one lawmaker abstained. The government swiftly said it will reject the law because of its technical, constitutional and procedural shortcomings which make it very d
ifficult to implement.

Governor of the Central Bank of Kuwait Sheikh Salem Abdulaziz Al-Sabah said the amount of interest and returns on personal and consumer loans covered by the law amount to KD 1.818 billion. Finance Minister Mustafa Al-Shamali told reporters after the vote that the government will reject it because it cannot be implemented. Under the law, the government can reject legislation passed by the Assembly, but MPs also have the right to override the government's rejection.

To override the government rejection, MPs have two options: Either they pass the legislation with a two-thirds majority in a fresh vote in the current term, or wait until the next term starting October and pass it with a simple majority. In this case, the law becomes compulsory and the government has to implement it.

The law requires the government to first write off all outstanding interest on personal and consumer loans taken out by Kuwaiti citizens from banks and investment companies until Dec 14. Then, the law stipulates these banks and investment firms have to reschedule the remaining debt in interest-free monthly installments that must not exceed 35 percent of the debtors' income. The repayment must be made over a period of at least 10 years, according to the law. The government has said that the total amount of
loans and its interest is KD 6.7 billion.

Shamali had told the Assembly that the scheme could cost public funds up to KD 3.725 billion and that it will encourage citizens to spend lavishly and seek fresh loans. Under the law, the government will use returns on its deposits of KD 8.5 billion at local banks to finance the cost of the scheme.

During the debate, MPs rejected an amendment that calls for the state to pay any fines resulting from a delay in the repayment of the installments. The approval of the law came after two days of nail-biting debate that was marred by heated arguments in which supporters and opponents of the scheme traded accusations. The session was adjourned prematurely on Tuesday after speaker Jassem Al-Khorafi failed to bring order to the floor. At the start of yesterday's session, a number of MPs harshly criticized Khor
afi for adjourning the session, saying that he did not have the power to end the session.

The passage came despite passionate appeals by the government and delay tactics used by opponents of the bill. Liberal MP Ali Al-Rashed, who opposed the law, said the legislation constitutes a flagrant violation of the constitution, describing the efforts to pass the law as "legislative corruption". Salafist MPs also exchanged heated arguments amongst themselves, with Khaled Al-Sultan supporting the law and Ali Al-Omair and Mohammad Al-Mutair opposing it. Their arguments focused on a fatwa by the main Sala
fi organization, the Islamic Heritage Revival Society, which said the law was in violation of sharia law. Sultan insisted it did not.

A number of MPs were also engaged in heated arguments with the finance minister who accused some MPs of pursuing populist policies while ignoring national interests of the country. Kuwait says it sits on 10 percent of global oil reserves and pumps around 2.2 million barrels per day. The state holds assets estimated at $230 billion, mostly invested abroad, amassed during the past decade on the back of high oil prices. More than 80 percent of the citizen workforce is employed by the government and their aver
age monthly salary is $3,500. Per capita income in 2008 was about $40,000.

In a related development, the Assembly is scheduled to hold a special session today to discuss a draft law stipulating to grant around 100,000 bedoons, or stateless Arabs, civil and social rights. The Assembly failed to meet on two previous occasions to discuss the issue.