Question

Write a research about The effect of postponing consumer bank premiums for 6 months on the Kuwaiti economy?

5-6 pages maximum

Answer 1

Q- Write a research about The effect of postponing consumer bank premiums for 6 months on the Kuwaiti economy?

Answer-

Kuwait has been hit by two related shocks - the COVID-19 outbreak and sharp drop in oil prices. As of April 15, the number of confirmed COVID-19 cases stood at 1,405. The government took resolute actions to contain the spread of the virus. These include imposing partial curfew and travel restrictions, suspending inbound commercial flights, closing schools and universities, banning public celebrations and gathering, and suspending nonessential work in governmental entities. On the economic front, the policy measures focused on mitigating the negative impact of the shocks on activity. Ample financial buffers and strong financial sector allow Kuwait to face these shocks from a position of strength.

Kuwait’s central bank on Sunday instructed banks to postpone amounts due from coronavirus affected customers for six months without applying any penalties, it said in a statement.The move, part of various measures by the central bank in response to the coronavirus crisis, extends a previous directive in March which stipulated a three month postponement. The six month window runs from March to September.

Certain measures Kuwait has also takes which are as follows-

General measures

Kuwait has announced several measures in response to COVID-19 to support the economy, but to date, no specific tax measures have been issued.

Corporate income tax measures
Not applicable / No announcement

Indirect tax measures (VAT and Customs)
Not applicable / No announcement

Individual taxes and labour
Not applicable / No announcement

Other taxes (local taxes, procedures)
Not applicable / No announcement

Tax payments/penalties amnesty
Not applicable / No announcement

Tax reporting
Not applicable / No announcement

Economic measures

The Kuwait Central Bank has announced the following measures:

• Reduction in the discount rate from 2.50% to 1.50%;
• Establishment of a KWD 10m fund to support COVID-19 containment efforts;
• Three month deferral of the collection of payments from affected customers; and
• Removal of charges imposed on ATMs, online transactions and POS transactions for a period of 3-months

As of 25 March: The Kuwait Banking Association has announced the following measures:

• Six month postponement of the payment credit card installments for all citizens;
• Six month postponement of the payment of loans and interest for all citizens;
• Six month postponement of the payment of loans and interest for SMEs; and
• No interest or fines in respect of the above postponements

As of March 31:

The Kuwait Banking Association has announced the following measures:

• Six month postponement of the payment of credit card installments for illegal residents and children of Kuwaiti women;

• No interest or fines with respect to the above postponement; and

• Expatriates will be treated on a case by case basis.

As of April 1: The Kuwait Cabinet has announced that it will adopt the recommendations put forth to address the economic and social impact of the coronavirus.

As of April 2: The Central Bank of Kuwait has announced the following for local banks:

• Reduction of the capital adequacy requirements by 2.5%

• Reduction of liquidity requirements

• Reduction of the risk weight of small and medium enterprises from 75% to 25%

• Increase of the maximum funding available from 90% to 100%

• Increase of the permitted percentage of financing to the value of the property (LTV)

Immigration and Employment measures

As of March 29

The Ministry of Interior's (MOI's) General Department for Residence Affairs has made the following announcements:

• An exemption has been granted to Kuwaiti nationala with respect to fines incurred as a result of the expiry of their workers' residency permits during the period of state administration disruption.

• A requirement has been imposed for Kuwaiti national business owners to renew the residency of their (i) registered workers and (ii) domestic workers via the online portal on the official website of the Ministry of the Interior.

Furthermore, visitors with commercial, tourist or family visas that have expired during the holiday period in Kuwait are allowed to exit the country without paying fines once the airport commences flight operations.

The Public Authority for Manpower (PAM) announces, in light of cabinet decisions taken regarding measures to combat the new coronavirus. It has been decided to open the doors of government contracts and project management for two hours throughout the week except Friday, starting from 10 am to 12 pm.

Kuwaiti authorities have announced a nationwide 11 hour curfew starting 22 March 2020 between 5pm to 4am, until further notice.

Kuwaiti authorities have extended the closure of offices until 9 April 2020, as of 22 March 2020.

As of March 31:

In accordance with the Ministerial Resolution No 288 issued on 27 March 2020, all foreign nationals who do not hold a valid residence permit in Kuwait are required to exit the country between 1 April 2020 and 30 April 2020, from any of the designated ports of exit. The exit formalities will be completed at the port of exit. Tourist/Commercial Visit Visa/Visit Visa holders are requested to exit Kuwait no later than 30 April 2020 in order to avoid the payment of any fines.

The Kuwaiti authorities have arranged temporary accommodation facilities for foreign nationals who are required to exit the country on or before 30 April 2020 (in accordance to the Ministerial Resolution No 288), until the required exit arrangements are made and to complete the exit formalities. Foreign nationals with expired Kuwaiti permits and Tourist/Commercial Visit Visa/Visit Visa holders are requested to report to the designated accommodation centres immediately between 8am to 2pm on all days.

1- Reception for males (Al Farwaniyah Governorate - Al-Muthanna Primary School - Boys (Block) 1 (Street) 122)

2- Reception for females (Al Farwaniyah Governorate - Farwaniya Primary School - Girls (Block) 1 (Street) 76)

As of April 2:

The Public Authority for Manpower (PAM) announces the online renewal of Work and Residence Permit for expats who are both inside or outside of Kuwait. The applications for the renewal Work and Residence Permit needs to be submitted online, by the sponsoring entity in Kuwait. The approval of the application is at the discretion of the authorities. This is applicable for expats whose permits have expired during the travel ban/restriction period. Upon successful renewal, the Residence Permit details will be updated in the immigration systems and the expat should have no issues entering Kuwait, once the suspension on travel into Kuwait is lifted.

Online application for Civil ID renewal can be filed once the Residence Permit has been renewed.

As of April 5: According to a circular issued by the Ministry of Health on 5 April 2020, individuals who leave mandatory quarantine facilities or are discharged from a hospital (after being tested negative from COVID-19 infection), are required to observe a mandatory home quarantine for 14 days. The files of individuals discharged are sent to public health services teams in every health zone to ensure compliance.

As of April 6: The Kuwaiti authorities have announced online application services for the following applications:

1. New passport information transfer service for expatriates;

2. Latin name modification service according to passport;

3. Renewal of residence permit family, Article (22) service; and

4. The residence sponsorship renewal service of the same person, Article 24.

The applications are to be filed through the website of the Ministry of Interior (MOI) (www.moi.gov.kw).

This online service is applicable for individuals whose Kuwaiti Residence Permit has expired as on 1 March 2020.

As of April 12:

Kuwait authorities have extended the partial curfew by two hours effective 7 April 2020 from 5pm to 6am until further notice. All Ministries, government entities and the public sector will remain closed until 26 April 2020.

The decisions taken at the Council of Ministers’ meeting on Thursday 9 April 2020 is to:

• Instruct the General Administration of Civil Aviation to issue a circular allowing the operation of flights for all airlines concerning travel for those who reside in the country and wish to return to their home countries
• Entrust the designated authorities with the preparation of all the necessary requirements to plan for a comprehensive ban on roaming in all regions of Kuwait if such decision gets issued, in order to ensure the provisions of these plans, achieve the desired goal and avoid any possible obstacles

Based on the decision of the council of Ministries on 9 April 2020, the Council accepted the operation of all airline flights to residents (non-Kuwaitis) wishing to return to their home countries.

Given the above, the Directorate General of Civil Aviation is pleased to announce its acceptance of requests from all airlines, as per the applicable procedures of the Air Transport Department, to obtain the necessary approvals for flight operations for those wishing to travel out of Kuwait.

As of April 15: This is due to the exceptional circumstances that the country is going through at the present time in order to facilitate citizens and residents, and in view of the disruption of work in all ministries, government agencies, public bodies and institutions until the date of 4/26/2020, in implementation of Civil Service Bureau Circular No. (10) for the year (2020). Complementing the efforts made by the Ministry of Interior and its endeavor to address the situation of violators in the country, which will reflect positively on the security, humanitarian and economic side. His Excellency Deputy Prime Minister, Minister of the Interior and Minister of State for Cabinet Affairs, Anas Khaled Al-Saleh - issued a ministerial decree granting residents in conflict with a temporary residence that is valid for a period of three months, starting from the date of 1/3/2020, with a maximum of all cases ending on 31 / 5/2020 automatically through the computer system in cooperation with the information and communications technology sector and they are as follows:-

1. Residents who are inside the country only residency holders (of all kinds) who have expired.

2. Those who entered the country according to entry passes or visits (of all kinds) and the validity of their entry passes expired.

Provided that the sponsor or the employer during this period modifies the status of the violator who was granted temporary residence automatically by completing the residence procedures previously granted to him through the website of the Ministry of Interior.

Few more measures are as below-

Fiscal measures

• Budget for ministries and government departments increased by KD 500 million for the fiscal year 2020/2021.
• Monetary and liquidity stimulants.
• Central Bank of Kuwait measures.
  • Discount rate reduced to a historic low of 1.5 percent.
  • Repo rates, overnight, one-week and one-month reduced to 1 percent, 1.25 percent, and 1.75 percent respectively
  • Capital adequacy ratio lowered from 13% to 10.5%
  • Risk weight for SMEs lowered from 75% to 25%
  • Limit of financing increased from 90% to 100%
  • Loan to Value (LTV) ratio to be increased for properties
• Kuwait Banking Association announced a moratorium period up to 6 months on bank loans including waiver of interest and charges (if any for postponement) for retail clients (citizens and expats) and SMEs
• Other measures
  • Temporary fund established to receive financial contributions from locals in support of the government’s efforts related to the outbreak
  • Limit for contactless payments increased to KD 25 from KD 10 and fees on point of sales devices and ATM withdrawals suspended for three months.

Liquidity measures

• Additional financial support to SMEs
  • Providing loans on concessional and long term basis to SMEs, through joint financing from local banks and the Kuwait National Fund for SMEs
  • Assisting SMEs and agricultural projects by postponing the instalments funded by the Kuwait National Fund for SMEs and the Industrial Bank of Kuwait
• Postponing social security contributions by business owners in the private and oil sectors (not fully owned by the state) for a period of (6) months
• Expediting work cycle to ensure that the government pays amounts due, to the private sector at the earliest
• Providing government exemptions to the affected economic institutions in the manufacturing sectors and the cooperative societies from some government fees and dues (if these exemptions are passed through to their clients)
• Exemption for self-employed Kuwaitis registered under Chapter Five of Social Security Law from contribution towards insurance for a period of (6) months
• Relief for citizens
  • Support for the salaries of those registered under Chapter Five of Social Security in the affected sectors
  • Easing withdrawals from the retirement pension
• Relief for residents
  • Establishing a mechanism to secure a minimum income that ensures the cost of living for workers affected by the current crisis
  • Maintaining stability in the levels and prices of food and medical commodities in local markets.