I recently read an article titled, “Foreign banks eye Kuwait’s $104bn plan” which stipulates that the Kuwaiti government’s KD30 billion development plan interests not only local investors, but also foreign banks.
The plan, which was proposed in April of this year, aims to start a stream of investments in major infrastructure projects such as building new ports and cities and investing to raise oil and natural gas production. The government will finance 50% of the projects and the rest will be financed by the private sector. The government gave the approval for the plan to be financed by the Kuwaiti banks, however foreign banks operating in Kuwait came in and are keen to have a share in the financing.
Financing the world’s fourth largest oil exporter in an unhealthy financial environment is a good deal, as it will decrease NPLs and provisions. I’m not sure how much share each bank will be given, but I would guess that it would be according to competitiveness. If that is the case, foreign banks will have much more room to give lower rates than local banks as benchmark rates in the US and Europe are much lower than Kuwait.
(No Ratings Yet)
Loading ...Tags: Kuwait, Kuwait Development Plan
Even though foreign banks may offer competitive rates, another thing to consider is the maximum exposure the foreign banks would like to limit themselves to in the Kuwaiti market
I agree that they have a part to play, but I truly think that Kuwaiti banks will drive this financing initiative and foreign banks will complement the effort
Good article.. keep up the good work
[Reply]
As well as providing a funding mechanism for the massive development projects that are planned, the opportunity to lend provides the Kuwaiti banks with a means to lend their way out of current (NBK excepted) non-performing loan problems. The increases in lending will lower the NPL ratios as well as providing the revenue streams to allow faster provisioning of existing current problem debt – and there is alot of this.
The stimulus to the overall economy should also throw up better investment opportunities for investors than the twin casinos of real estate and the investment company sector. IMHO a much better way to use government money to solve structural economic problems than either bailing out the KSE or the banks directly.
[Reply]