Both the dollar and the pound will remain subdued. Kuwait’s currency, the Kuwaiti dinar, is so strong. Three times the value of the dollar. As of December 28, the Kuwaiti dinar is above 270 rupees. Often it increases. The Kuwaiti dinar also holds the crown as the world’s most valuable currency as it continues to soar, breaking records in value. The Kuwaiti Dinar was introduced in 1961. When Iraq invaded Kuwait in 1990, the currency died an untimely death. But the dinar made a strong comeback, along with the return of Kuwait, defeating the might of Saddam Hussein’s Iraq.
Kuwait is a country with only half the area of Kerala. The population is less than 44 lakhs. Only one-third of them are natives. All the rest are expatriates. A large percentage of Indians. But Kuwait and the Kuwaiti Dinar are very strong. Its strength has increased with the post-Covid surge in oil prices. The Kuwaiti dinar has held steady even as the dollar has strengthened in recent years and most of the world’s currencies have fallen. Japan’s currency, the yen, has fallen more than 20 percent against the dollar in two years. The Indian rupee also suffered a setback. But the Kuwaiti dinar lost less than half a percent. What enabled them to do so? Let’s check in detail.
Six percent of the world’s oil reserves are in Kuwait. One of the top 10 oil rich countries in the world. Among the oil-rich Gulf countries, only Saudi Arabia is ahead of Kuwait in this regard. Qatar and the UAE, which have shown their strength by successfully conducting the World Cup, are behind. Kuwait is the sixth largest oil exporter. Kuwait’s strength is this oil that was received like a fortune. Perhaps the only force. While all the other Gulf countries began diversifying into non-oil revenues during the oil price slump, Kuwait did not think much of that path. 95 percent of Kuwait’s export earnings come from oil.
Even Saudi Arabia has started increasing revenue from things like tourism, imposing levies and taxes on expatriates, but Kuwait doesn’t bother with that. They were lazy without deviating much from the traditional ways. But luck was with them. With the rise in oil prices, Kuwait’s economy has recovered. Kuwait, which had presented a deficit budget for the past several years, has again presented a surplus budget this year. Kuwait is one of the world’s leading countries in terms of per capita income.
But oil is not the only factor strengthening the Kuwaiti dinar. Despite the lack of diversification of income within the country, Kuwait is not playing the game out of hand. This country is investing with great anticipation for the future. The Kuwaiti society, which considers oil wealth as a blessing from God, invests with the view that the income from it should be set aside for future generations. They acted with foresight so that they would not be swept away without saving anything for future generations. This also strengthened the Kuwaiti dinar. 10% of the annual income is invested in the provident fund with a view to benefit future generations. At present the reserve fund is 738 billion dollars (1 billion = 100 crores). Ekadesam is equal to 61 lakh crore Indian rupees! It is the largest among the Arab countries. It also ranks third globally. Kuwait has one of the oldest reserves in the world. According to Forbes magazine’s list, half of the reserve fund overseen by the Kuwait Investment Authority is invested in the United States. In general, all Gulf countries have such reserves. Arab countries also have the world’s largest reserves. It is estimated that one-third of such funds belong to Arab countries.
Less than a hundred rupees to the dollar and more than 250 rupees to the Kuwaiti dinar. But don’t think that if you go to Kuwait, you’re going to die. The salary there is low according to the value of the currency. The salary for many jobs is only two to three hundred dinars. Many jobs pay less than other Gulf countries. But the fact that there are currently no taxes or levies is what makes Kuwait attractive. During the crisis after the drop in oil prices, Saudi Arabia started imposing various types of levies on expatriates. All those living with family and working visas have to pay the levy. Although the companies themselves will pay this, Levy has become the villain in matters such as salary increase. Other taxes are imposed by Gulf countries including Saudi Arabia. The absence of such taxes makes Kuwait a country with a low cost of living.
At the same time, like other Gulf countries, Kuwait has initiated various measures to reduce the number of expatriates. Residence permit for expatriates above 60 years of age without graduation qualification has been stopped from January 1, 2021. Currently, all those in this category in Kuwait will have to leave the country once their residence permit expires. With the budget deficit, there was a move to increase fees for Kuwaiti government services for foreigners. The attempt was to charge different rates for services to citizens and foreigners. There was also a plan to levy VAT on the model of other Gulf countries. At the same time, India can be happy as Kuwait continues to strengthen. The largest flow of money from that country is to India. In 2021, 29.5% of foreign remittances were to India, according to Kuwait Finance Department.