Weak dollar not a concern for Gulf economies, says Kuwait minister.
KUWAIT: The weak US dollar is not a concern for Gulf economies and Kuwait is likely to increase spending in its budget for the next 2011/12 fiscal year, the OPEC country's finance minister said over the weekend.
The dollar's slide has caused concern among oil producers as it pushes down the value of their dollar-denominated oil revenues while the price of their commodity imports, such as grains, have been increasing.
However, when asked whether there was any concern about the impact of the weak dollar on Gulf Arab economies, Kuwait Finance Minister Mustapha al-Shamali said: "No."
"Inflation levels in the GCC are not worrying," Shamali was quoted as saying by officials news agency KUNA.
The dollar hit an 11-month low against a basket of currencies earlier this week.
Kuwait, unlike its fellow Gulf oil producers, abandoned its currency peg to the dollar in 2007 in favor of a currency basket to rein in then soaring inflation, which is on the rise again.
A weak dollar also tends to lift oil prices as money shifts from the currency market to commodities in search of better returns.
John Sfakianakis, chief economist at Banque Saudi Fransik, said a weak dollar would impact on inflation across the Gulf region but did not see a change in Gulf countries' currency regimes.
"There is plenty of evidence today that the Gulf economies as a whole will neither consider devaluing or depegging from the dollar as it is neither prudent nor serves an economic purpose," he said.
"However a further weakening of the dollar will have some inflationary pass-through impact," he added.
Price pressures are highest in Saudi Arabia and Kuwait with inflation above 5 percent, whereas in the rest of the Gulf Arab region inflation is more benign.
Shamali told reporters on the sidelines of a meeting of Gulf finance ministers and central bank governors in Kuwait the Kuwait government's expenditure would rise in the next fiscal year's budget.
"There is some increase in the budget but we are discussing it," he said.
The world's fourth-largest oil exporter ramped up spending by more than 34 percent in its current budget for 2010/11, which began in April, partly to diversify its oil-reliant economy and increase the role of the private sector.
The OPEC member's 2010/11 budget forecasts a deficit of 6.58 billion dinars or nearly 21 percent of gross domestic product, assuming oil, the key revenue earner, would fetch $43 a barrel.
Benchmark US crude ended at $86.85 a barrel Friday. -- Reuters
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|Publication:||The Daily Star (Beirut, Lebanon)|
|Date:||Nov 8, 2010|
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