Thirty-three MPs voted for the law, three opposed it while 20 others, including 15 Cabinet ministers, abstained. State Minister for Cabinet Affairs Sheikh Mohammad Al-Abdullah Al-Sabah said “the government rejects the law in its current form” but as a sign of cooperation with the house, “we will abstain” in the voting. MPs and the government then agreed that they will study any amendments to the law before the second round of voting which is expected in the coming few weeks.
The law requires that the government buys all loans taken by Kuwaiti citizens before March 30, 2008 from conventional and Islamic banks and financial companies. The state will them write off all interest on the loans before rescheduling their repayment in easy instalments over a maximum of 15 years under the condition that each monthly instalment does not exceed 40 percent of the debtors’ income. The law stipulates that debtors are free to tailor their instalments which can be less than 40 percent of their income provided repayment does not exceed 15 years. The legislation also allows people covered by the law to seek fresh loans from banks provided their income is capable of meeting credit rules and conditions that apply to normal people.
Shamali objected to the report of the financial and economic affairs committee because it opened the door to include new categories, thus increasing the cost to public funds. “We need to have a technical solution the cost of which should be reasonable. After all this your money,” the minister said. Several MPs then strongly criticized the minister, accusing him of backing down from an agreement he reached with the committee last week and charging that the minister was trying to hinder the passage of the law.
Head of the financial committee MP Yousef Al-Zalzalah criticized Shamali for backing down, saying he is deliberately exaggerating the cost of the process. Zalzalh said the cost as supplied by the Central Bank will be KD 720 million for clients of conventional banks and KD 930 million if customers of Islamic banks are added. He also insisted that the cost to public funds will be minimal and banks will lose KD 300 million in interest after the government pays in full the amount of loans to the banks. Zalzalah said that some people don’t want this Assembly to continue and don’t wish to see this house make any key achievement. “We went to his highness the Amir and his instructions were clear to resolve this problem”.
MP Khaled Al-Adwah said the finance minister has always opposed any solution to the debt problem and is trying to obstruct the passage of the solution. He accused him of siding with banks and merchants. MP Ahmad Al-Mulaifi said that during the period until 2008, banks illegally charged high interest rates and these funds must be returned to borrowers. Islamist MP Ali Al-Omair questioned why debtors who took loans after 2008 are not covered. “Aren’t these people Kuwaitis too?’ asked Omair, who blasted the law as unfair.
Independent MP Salah Al-Atiqi said the law was basically politically-motivated to meet election purposes. “The issue started with some candidates making election promises. In fact, there is no real debt problem in Kuwait. No country in the world has ever written off loans or interest,” Atiqi said. “Waiving interests could lead to the collapse of the credit system and trigger a financial catastrophe. Merchants and banks are the only ones to benefit from the law,” he said. “The most dangerous aspect in the law is that it encourages people not to respect their financial commitments because there is always a state ready to bail them out,” Atiqi said.
MP Ashour said that banks must be made to return the illegal interest they had charged, claiming that the government has made deposits worth KD 17 billion at a nominal interest rate of 0.5 percent while banks use these funds to lend to people at an interest rate ranging from 4 to 15 percent. MP Saadoun Hammad however made a different proposal. “Since we have 5,000 petrol stations in Europe and all of them sell liquor, I propose to use proceeds from selling liquor to fund the proposed solution,” he said sarcastically.
Speaker Ali Al-Rashed, who strongly opposed any debt relief scheme in previous assemblies, called for passing the law. “Kuwait helps friendly countries with billions of dinars, why can’t it help its people with KD 900 million” he said. “The issue is not only technical but also political. There are some quarters who don’t want this Assembly to continue. We should give our people something,” said Rashed.
