Kuwait announced Sunday an economic rescue plan aimed to provide wide-ranging state guarantees to bank loans and bail out floundering investment firms, Xinhua reported.
Kuwait's central bank governor Sheikh Salem Abdul Aziz Al Sabah unveiled the plan at a press conference here, saying that the plan was given a green light by the cabinet on Thursday and needs approval from the parliament.
Under the plan, the state would guarantee 50 percent of the new credit facilities, totaling 4 billion Kuwait dinars (about 13.6 billion U.S. dollars), which will be extended by the banks to local companies in 2009 and 2010 with an aim to encourage local banks to give fresh credit to firms, according to the governor.
Sheikh Salem said the cumulative debt on 99 Kuwaiti investment firms is 5 billion dinars, of which over 40 percent is owed to foreign banks and financial institutions.
In the second half of last year, the country's frontline investment banks came out with shocking announcements of payment defaults and cash shortage to repay loans, he said, adding the plan gives a 15-year guarantee on any depreciation in the value of banks' investments and realty portfolios.
Last year, Kuwait had guaranteed deposits of all banks operating in the country, when a leading bank suffered heavy derivative losses.
Sheikh Salem, meanwhile, noted that the current key discount rate in Kuwait is at an appropriate level.
In the light of the global financial meltdown, Kuwait's leading investment banks, such as the Global Investment House and the Islamic lender Dar Investment, recently made shocking announcements of defaulting on payments and cash shortages of over 1 billion dinars to repay loans.
The country's second largest lender in terms of assets, the Gulf Bank, also suffered serious losses in derivate. (1 Kuwait dinar = 3.4 U.S. dollars)