Published: March 16, 2009
Kuwait’s government is allegedly considering to set up a multi-billion bailout fund to help troubled firms in light of the global financial crisis, several newspapers reported.
The cabinet are said to have discussed a new package of measures to boost the economy and has agreed to set up a KD5bn (US$17.32bn) fund to buy assets from firms while giving them an option of buying the assets back at the same price, Al Watan newspaper said in an unsourced report.
Final approval is expected within days and will be based on a report by the government's economic and legal committees.
In November 2008, Central Bank governor Sheikh Salem Abdul-Aziz al-Sabah said the government planned to set up a fund to buy assets at a discount from investment firms and issue them promissory notes enabling them to borrow from banks. The rescue plan includes measures to ensure deposits and guarantee special loans in local banks, according to Al Watan.
The Kuwaiti government is facing increasing calls to support troubled investment and holding firms which have borrowed heavily to finance expansions during the oil boom in the last few years.
Kuwait's largest investment bank, Global Investment House, said earlier this month it had defaulted on most of its debt, while major Islamic firm Investment Dar is also looking for US$1bn in new funds to meet its financing requirements. At the end of last year, shareholders in Gulf Bank approved a rescue plan ordered by the central bank to raise KD375mn (US$1.3bn) in an emergency rights issue to cover derivatives losses of the same amount.