How Kuwait’s political gridlock is hampering economic policymaking, competitiveness

Al-Monitor Pro Members

Dr. Robert Mogielnicki

Senior Resident Scholar, Arab Gulf States Institute in Washington

May 8, 2023

Kuwaiti Crown Prince Sheikh Meshaal al-Ahmed al-Jaber al-Sabah formally dissolved the country’s National Assembly — or parliament — by royal decree on May 1, 2023. Institutional gridlock between Kuwait’s appointed government and elected parliament has hampered the ability to advance an effective economic policymaking and reform agenda, ultimately reducing the country’s economic competitiveness. Kuwait possesses massive sovereign wealth holdings and therefore very strong credit fundamentals, but the country’s economy is neither dynamic nor robust.

Scenario 1: Continued political gridlock prevents genuine economic policymaking and reform efforts, leading to a slow — but manageable — deterioration in the economic environment and the country’s competitiveness. 

Kuwait falls further behind neighboring Gulf Cooperation Council (GCC) states as a hub for global talent and foreign direct investment. A small group of wealthy, politically-connected individuals continue to benefit from the prevailing political and economic institutions in Kuwait; however, many local and international businesspeople opt to exploit growing opportunities in neighboring Gulf countries and other emerging markets.

Scenario 2: The confluence of political gridlock, poor policy decision-making and unexpected economic shocks eventually results in a major economic crisis in Kuwait. 

The Kuwaiti emir or crown prince does not issue emergency decrees to address mounting economic challenges. Facing a steep drop in oil revenues and no legal path to issue debt, the government draws heavily upon its sovereign wealth holdings. These drastic measures damage the country’s strong reputation afforded by its fiscal and external balance sheets.

Scenario 3: The political situation stabilizes and/or key stakeholders in government and parliament respond to the growing need to work together to advance various economic policies, reforms and economic development initiatives. 

An overarching desire to ensure the economic welfare of citizens leads to a newfound political consensus. Government officials and members of parliament work closely to reconfigure wasteful subsidies, streamline the country’s “complex business environment” and better utilize financial resources to unlock economic growth.

Dr. Robert Mogielnicki’s professional affiliations span top-tier research institutes, academic institutions, NGOs and consultancies. He is a Senior Resident Scholar at the Arab Gulf States Institute as well as an Adjunct Assistant Professor at Georgetown University and a Professorial Lecturer at George Washington University. He serves as an Adviser with Freedom House and an External Consultant with Eurasia Group. Dr. Mogielnicki is the author of "A Political Economy of Free Zones in Gulf Arab States" (Palgrave Macmillan 2021), and he is currently working on an edited volume about the political economy of sovereign wealth funds in the Middle East and Asia. He is a Term Member at the Council on Foreign Relations and a member of the Board of Advisers at Henley & Partners, an investment migration firm. The Middle East Policy Council listed Dr. Mogielnicki in their inaugural 40 Under 40 awards for influential Middle East experts. He holds a DPhil from Magdalen College, University of Oxford.