Devaluation only solution
amajority of the people were neither surprised by the size of defi cit in the balance of payments nor when the government had to borrow to fi nance the state budget defi cit. there is almost unanimity in the impossibility of addressing the budget defi cit. no one wants to come close to salaries and subsidies, and it is clear that the government is unable to curb spending or deal more seriously with the severe economic problems; therefore the consequences will be actually terrible. one of the solutions i have been advocating for more than 20 years, and constantly, is to resort to devaluation of the dinar as long as it is not possible to approach the payroll item. the experience we witnessed during the period of saddam’s occupation of kuwait when everyone accepted, for seven months, the price of two-and-ahalf dollars in exchange for one kuwaiti dinar, but after the liberation, the political and fi nancial authorities decided to go back to the dinar to its pre-invasion rate of $3.5. it was an incorrect political decision that caused the state to lose billions of dollars because the fi nancial system had to repay the debts of kuwait for $3.5 instead of $2.5. the banks also transferred hundreds of millions of dinars from the balances of residents who did not return to kuwait for one reason or another and converted them at $3.5 per dinar instead of 2.5, although these residents never dreamt of getting some of their assets. therefore, the government today has no alternative but to seriously reconsider the issue of gradual devaluation of the kuwaiti dinar, even if for two years. it is not acceptable to remain as it is now. i say that although i will be harmed as an investor and trader, but national interest, and future generations in the long term are more important than my personal interest. we demand devaluation in spite of the recent rise in oil prices, but who will ensure that the situation remains as it is, noting that the state budget defi cit is increasing year after year. the devaluation of the exchange rate will strengthen kuwait’s reserves in dollars and other currencies. the low rate of the dinar will encourage increasing exports and reduce the unjustifi ed expansion of imports. the proposed exchange rate will also limit the unjustifi ed consumption and tourism, which will, of course have a negative impact on the income of domestic and small labor, as it will receive less dollars for the salaries the workers receive. the subsidies on commodities offered by the government to families should also be rationalized and limited to lowincome people, while fuel and electricity prices should be gradually raised, and apply a system similar to progressive taxes so that the low-income or pensioners are not affected. economist marwan salama believes that reducing the dinar rate will push the government, in general, to rationalize its unjustifi ed spending. we write and say and ask, perhaps … and perhaps
