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Finance Minister briefs MPs on GRF cash flow outlook, presents scenarios to boost liquidity

Finance Minister Dr Nayef Al-Hajraf

KUWAIT: In a joint off-floor government-parliament meeting held on Sunday, Kuwait’s Minister of Finance Dr Nayef Al-Hajraf briefed parliamentarians on the liquidity outlook for Kuwait’s General Reserves Fund (GRF) for the next five to ten years, while emphasizing the need to adopt short and long-term reforms to safeguard the country’s GRF and boost its liquidity ratio.

The Minister spoke at length about the liquidity outlook of the GRF, while stressing that it is important to distinguish the GRF liquidity concerns from the performance of the much larger Future Generations Fund (FGF), commonly referred to as the country’s sovereign wealth fund, which continues to grow year-on-year in Assets Under Management (AUMs) and returns.

The GRF is one of two funds managed by the Kuwait Investment Authority, which is chaired by the Minister of Finance, and is the main repository of all the State of Kuwait’s revenue to finance the national budget and obligations. The other fund, The Future Generations Fund (FGF), is an intergenerational savings platform where a minimum of 10% of all state revenue is transferred for investment on an annual basis. All FGF returns are reinvested in the FGF itself.

Hajraf said, “Let me start by dispelling recent speculations regarding the performance of Kuwait’s sovereign wealth fund, the FGF. I assure everyone that the FGF continues to grow and perform above benchmarks. As for the liquidity of the General Reserve Fund (GRF), it is under pressure due to growing budget expenditure and a low-oil price environment in recent years. Boosting the liquidity of the GRF is a shared responsibility, and although the executive branch bears the largest part, we urge the legislative branch to pass the required legislations to strengthen liquidity in the reserves.”

During the meeting, Hajraf disclosed the total assets of the General Reserve fund as of 31/03/2018 at approximately KD 26.4 billion, equally distributed between cash and equivalents and non-liquid investments (around KD 13.2 billion each). Hajraf presented various scenarios of oil prices from $70 to $100 per barrel, explaining their effect on the GRF and indicating the necessity to preserve the liquidity of the GRF under any and all oil price scenarios. Hajraf said, “Whether oil trades at $70 per barrel or at $100 a barrel, the GRF’s liquidity ratio remains a matter of concern unless real long-term economic and fiscal reforms are implemented.”

During the meeting, the cabinet urged parliament to expedite laws aimed at increasing the liquidity in the GRF, particularly the Government Borrowing Act which enables the government to issue sovereign bonds locally and internationally. The meeting was attended by the First Deputy Prime Minister and Minister of Defense Sheikh Nasser Sabah Al-Ahmad Al-Sabah, Deputy Prime Minister and Minister of State for Cabinet Affairs Anas Khalid Al-Saleh, Minister of Social Affairs and Labor and Minister of State for Economic Affairs Hind Sabeeh Al-Sabeeh, and Minister of State for National Assembly Affairs Adel Musaed Al-Kharafi.


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