The net asset value of the General Reserve Fund in Kuwait amounted to 5.6 billion dinars at the end of last March, compared to 15.4 billion at the end of January 2021, a decline of 64%.
While the risks of the sustainability of the General Reserve Fund have emerged during the past years in light of the frequent withdrawals that directly affected the levels of liquidity available in it, which reached the limit of depletion, the sources confirmed that the fund can still continue to work as an investment tool, according to Al-Anba newspaper, citing sources.
This comes in addition to assurances by the management of the General Investment Authority that the scope of the responsibility for financing the budget and filling the deficit and debt rests with the government and not the “general reserve”, and despite the measures taken to provide about 9 billion dinars of liquidity to the fund, but in isolation from the completed reforms, it will not be These measures are sufficient to eliminate the deficit.
The sources indicated that a recent report indicated that there is a risk that the General Reserve Fund will not be sustainable in the long term, if appropriate measures are not taken to ensure the availability of sufficient liquidity for the fund to manage capital withdrawals and to ensure that the net operating income is sufficient to cover the budget approved by the Ministry Finance.
The sources said, “However, the report also indicated that even in the case where the general reserve is not in a good liquidity position to continue operating as a tool of government treasury, it can still continue to act as an investment tool.”
He stressed that the reforms introduced by the government since March 31, 2020 are not sufficient to finance the expected budget, fill the deficit and pay the debts due over the next 12 months, and will require more measures by the government to address the budget deficit.
He stressed that the responsibility for financing the budget, the deficit and the debt lies with the government and not the “general reserve”, which was clarified by the management of the General Investment Authority to related parties that the commitment to bridge the deficit gap through alternative financing to bridge the deficit, and the implementation of accompanying economic reforms, is a matter that falls on The responsibility of the government, not the fund.
The source stated that the measures taken by the government since the end of March 2020 included a series of reforms that would provide about 9 billion dinars as liquidity to the general reserve through the exchange of assets of 2.2 billion dinars with the reserve of future generations, in addition to transfers by the Petroleum Corporation of 2.3 billion dinars, and canceling The annual commitment to contribute to the generations reserve and the Future Generations Fund to return 2.7 billion dinars of transfers last year, in addition to the demand of government departments and their affiliated entities to transfer the cash surplus of about 1.8 billion dinars to the general reserve.
He stressed that despite these measures taken, and apart from completed reforms, these measures will not be sufficient to eliminate the deficit, and the government will request further reforms, including a proposal for the state to issue more debt financing or agree to transfer funds from the Future Generations Fund, which It requires a change in the law.
The sources indicated that the value of the net assets in the two funds of the Minister of Finance amounted to 4.97 billion dinars, and in detail the value of the net assets at the end of the last fiscal year amounted to about 4.68 billion dinars in the Fund of the Minister of Finance, and 288 million dinars in “Fund 14.”