KUWAIT,(Reuters) – Kuwait’s stock market rallied to an all-time high on Wednesday ahead of the ruler’s decision to dissolve parliament and end a standoff with the government that has delayed economic policy changes.
The cabinet resigned on Monday, less than a year after it was sworn in, complaining of a lack of cooperation from a parliament that has challenged ministers — prompting several resignations — and blocked legislation.
Sheikh Sabah al-Ahmad al-Sabah, the emir of the world’s seventh-largest oil exporter, agreed to fresh elections in May, lawmakers said.
The speaker of the dissolved house had been informed of the decision but state media had yet to publish the official decree, lawmakers said.
The main index of the Arab world’s second-largest bourse rose 1.5 percent — its biggest one-day jump in two weeks — to a peak of 14,450.40 points, ahead of Sheikh Sabah’s decision.
“There is hope in the market that the assembly gets dissolved because it has hindered economic reforms,” Mustafa Behbehani, Director at Gulf Consulting Co, said ahead of the decision. “Investors hope with a new assembly things might go in the right direction.”
Kuwait wants to diversify its economy from oil and emulate Gulf neighbours such as Dubai or Bahrain which have created regional financial centres. A bill to set up a financial regulator and open the stock market to more foreign investment has stalled in parliament.
Deputies have also forced the cabinet to set up a fund to buy back bad debts that Kuwaiti nationals incurred from shopping sprees, in a blow to plans to end reliance on a cradle-to-grave welfare system.
While deputies made progress on reforms recently by approving a law to cut tax on foreign investors, tensions flared on Sunday after deputies demanded the government raise salaries for public service workers yet again.
The Cabinet in February approved an increase for the public sector, where more than 90 percent of Kuwaitis work.
Behbehani said this assembly had planned to pay out much of Kuwait’s vast budget surplus, in contrast to government plans to make the public service less attractive and persuade Kuwaitis to take up employment in the private sector.
Deputies had also pressured the central bank to lower the key discount rate which banks use to set rates for loans.