Kuwait hikes state wages, to act vs inflation

Kuwait hikes state wages, to act vs inflation

March 13, 2012 1:59 by Reuters

Authorities said late on Monday that government workers would get a 25 percent rise in their basic salaries, while pensioners would receive 12.5 percent more. Any increase in private sector wages will be announced at a later date, the government said.

The wage hike follows a series of strikes last year that put pressure on state companies to increase pay packets, as well a snap election last month that saw the Islamist-led opposition win control of parliament. The cabinet is appointed by a prime minister hand-picked by the ruling family.

In the wake of this week’s wage increases, the Ministry of Commerce has told economic officials to prevent any rises in the price of basic goods such as food, a top official said.

The ministry has “instructed trade controllers to handle decisively any attempt to raise the prices of basic commodities”, commerce ministry undersecretary Abdelaziz Al-Khaldi told state news agency KUNA. He did not elaborate on how prices would be controlled.

The upward pressure on wages in Kuwait, partly due to increased union activity since last year’s Arab Spring social unrest in the region, has become a major issue for economic policymakers. The finance minister said last year that public sector wages had risen to about 85 percent of the country’s oil revenues, which he called “a real danger”.

Last month Kuwait’s central bank governor Sheikh Salem Abdul-Aziz al-Sabah resigned after 25 years in the post, complaining about the rapid rise in government spending.

However, state finances appear able to cope with the latest public sector wage hike, at least for now; thanks to high global oil prices, the government posted a budget surplus of $47 billion in the first nine months of 2011, nearly double the surplus in 2010. Analysts expect economic growth to stay comfortable this year at around 3.5 percent.

And although the average inflation rate climbed to a three-year high of 4.8 percent in 2011, it remains far below levels hit in 2008, when it soared above 10 percent. Consumer prices rose 3.5 percent from a year earlier in January this year. (By Sylvia Westall)