Heated debates on policies and financial reforms are taking place in Kuwait among several stakeholders. These could result in opening up vast opportunities for building up an advanced economy that is less dependent on oil revenues.

And this will be the right approach that should be embraced by most oil producing countries in a bid to establish a durable and robust financial and economic structure. Although such an approach has received considerable backing in most Gulf states, some members of the Kuwaiti National Assembly are leading a campaign to abolish the increase in gasoline prices, which went into effect beginning September.

Yet, existing prices are less than the cost price and still greatly subsidised, costing the treasury dearly, and thus straining the annual budget. Many MPs are trying to undo the increase by questioning the finance minister’s actions and trying to oust him from the position. And all this for electoral gains, and will thereby reflect negatively on the economic future of their country.

It is a fact that economies built on subsidies are deemed very fragile and have no solid ground to face challenges, no potential for growth and exposed to serious economic shocks.

The Ministry of Finance’s approach aims to save $30 billion over the course of the coming five years and support the budget through some measures that include abolishing subsidies on fuels and electricity, prices of which are already one of the lowest globally and led to record consumption rates that do not necessarily represent actual needs.

Taking advantage of the national assembly’s annual holiday, some MPs are attempting to annul the decision through holding an emergency meeting to discuss the increase and question the finance minister.

This means transferring the debates to the parliament where political bargaining is expected to begin. But the fact that some are not aware of is that the increase comes as part of an official programme to ease burdens, reduce reliance on oil revenues and diversify sources of income.

It is true the increase will have a slight impact on some segments, whose cases can be considered and addressed. But the vast majority of society will not be affected due to being recipients of high salaries and living standards. So, the main issue here is not related to only subsidies but also to the future economic and financial approaches. Kuwait has two choices: Either accept the current situation as some MPs are calling for and exhaust oil revenues by offering subsidies that hurt the economy. Or conduct the reforms being called for by the government and change the foundation of public finance to ensure its stability and reduce reliance on oil revenues.

If we look at modern economies in the east and west, there is nothing called subsidy even though there are some polices that take into account some humanitarian needs and ways to overcome implications of unemployment among other things.

Yet, an all-inclusive subsidy policy was not applied there and only taken by some countries in this region, particularly with the inflow of oil revenues, for social and historical considerations. These no longer exist due to the high living standards and the development of education, health and housing services.

It is an issue that requires setting a tone by adopting practical and objective approaches and away from emotions. There are also some compromise solutions that can be taken into account such as granting low-income segments allowances for their help in abolishing subsidies.

This is a possible and practical solution that could unify the efforts of the government and the national assembly and build a strong, durable economy less dependent on oil while maintaining the stability, security and prosperity of Kuwait.

— Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.