Kuwait City, November 01: Speakers at a Kuwaiti forum on Sunday urged energy-rich Gulf states to boost spending in order to speed up recovery from the economic crisis, as well as step up financial sector supervision.
“We must activate public spending… It’s time that Gulf states activated their fiscal policies,” Ibrahim Dabdoub, chief executive of National Bank of Kuwait, told the first Kuwait Financial Forum.
The head of the Kuwait Chamber of Commerce and Industry, Ali al-Ghanem, called for the adoption of expansionary fiscal policies and provision of private sector loans.
“It is necessary today to adopt an expansionary fiscal policy to speed up the recovery from the global crisis. We must resolve credit bottlenecks for the construction sector and other companies,” Ghanem said.
Several Gulf states have pumped billions of dollars into their markets in a bid to help ease the credit crunch and ensure the implementation of infrastructure projects, but economists have said this was not enough.
The shortage in liquidity has caused the suspension or delay of hundreds of projects in the six-nation Gulf Cooperation Council (GCC).
Most speakers agreed Gulf states, with their huge petrodollars accumulated over the past few years due to soaring oil prices, have not been impacted like other countries by the global economic meltdown.
“There was no real crisis in the Gulf states. What happened were some bubbles here and there,” Dabdoub said.
Henry Azzam, chief executive of Deutsche Bank’s Middle East and North Africa division, said the main impact of the crisis on the Gulf was mainly felt by the investment companies in Kuwait, the real estate market in the United Arab Emirates and some major family-run companies in Saudi Arabia.
Governor of the Saudi Arabian Monetary Agency, or central bank, Mohammad al-Jasser said the Gulf financial sector was the main victim of the crisis.
He blamed “excessive lending, weak supervision and the role of the fiscal and monetary policies that encouraged borrowing” for impacting banks and investment companies.
“We must boost supervision on all financial institutions… any growth in the future must be accompanied by controls on lending. We must impose stricter regulations,” he said.
Dabdoub warned however that any “supervision should not (be allowed to) kill innovation.”
A number of Arab finance ministers and central bank governors are attending the two-day forum to debate the impact of the global financial crisis on Arab economies.
—Agencies