Kuwaiti authorities reached a provisional agreement on Tuesday requiring the government to buy out billions of dollars of bank loans owed by citizens and reschedule them interest free.
Finance Minister Mustafa al-Shamali, who had previously rejected similar proposals, said after a meeting with parliament’s financial and economic affairs committee that “an agreement on the issue has been reached.”
He told reporters it will be finalised next week after a technical-legal team studies the required details.
Committee chairman Yussef al-Zalzalah said the deal requires the government to buy all bank loans taken out by Kuwaiti citizens between January 1, 2002 and March 30, 2008.
MPs have claimed that local banks violated lending rules during the period by charging higher interest and the central bank failed to apply the law on them.
The government will then waive all interest on the loans and reschedule repayment in easy installments that must not exceed 40 percent of borrowers’ monthly income, Zalzalah said.
No details were given about the total size of the loans, but committee member Ahmad Lari said the process will cost around 900 million dinars ($3.2 billion).
Committee secretary Safa al-Hashem said around 66,000 debtors will benefit.
MPs have also proposed that every Kuwaiti who does not benefit from the debt relief scheme should be given a grant of 1,000 dinars ($3,500). Native Kuwaitis number 1.2 million.
The government had rejected a similar bill passed overwhelmingly by parliament in January 2010. At that time, the size of debt stood at around $21.6 billion and the interest at $5.2 billion.
Shamali said at the time the bill involved technical and constitutional violations and was impossible to apply. He also said the relief would encourage people to spend lavishly.
The change in government position came amid a bitter political dispute in the emirate and after the election of a pro-government parliament in a December poll boycotted by the opposition, which has staged several street protests.
The emirate holds assets estimated at $400 billion, mostly invested abroad, amassed during the past 13 years on the back of high oil prices.