KUWAIT CITY (AP) ¿ Kuwait's cut in public spending will do little to help it weather the global financial crisis, a leading investment firm in the tiny oil-rich Gulf Arab nation warned Thursday. Global Investment House said in a report that while the Central Bank has "almost used all available tools to stimulate the economy," fiscal policy has been "contractionary" even as other Gulf nations including Saudi Arabia, the United Arab Emirates and Oman have boosted public spending to stimulate their economies. Kuwait should have done the same, the report said. "Currently, Kuwait is in dire need for an economic stimulus to support economic activity," said Global, which itself is in talks with creditors after defaulting on roughly $3 billion in debts. Directing accumulated surpluses to increasing expenditure would create new jobs, boost economic growth and diversify the economy, the report said. Kuwait's 12.11 billion dinar ($41.75 billion) budget for 2009-2010, that kicked in Wednesday, projects a roughly 36 percent decline in spending compared to the prior fiscal year. It also forecasts the same percentage drop in revenues, almost all of which come from oil, the mainstay of the economy.
However, the country's deficits almost always turn into actual surpluses because estimated oil revenues are calculated at much lower prices than what its crude sells for. A $5.15 billion stimulus package devised by a task force headed by the Central Bank governor is expected to go into effect soon. It will offer a lifeline to troubled companies, bank loan guarantees and help banks increase their capital, but under stringent conditions.