Kuwait dissolves parliament, sets May election

( Reuter )- Kuwait's ruler dissolved parliament on Wednesday and will call an election for May, lawmakers said, after a political crisis delaying economic reforms forced the oil exporting state's government to resign.

Kuwait, whose stock market rallied on investor hopes the reforms would be approved by a new assembly, wants to diversify its economy away from oil like Gulf Arab neighbors Dubai and Bahrain that have become regional financial centers.

Kuwait's crisis was caused by a standoff between the cabinet and parliament, which has a history of challenging the government -- unusual for a region where countries like Saudi Arabia are dominated by ruling families.

Lawmakers said Kuwait's emir, Sheikh Sabah al-Ahmad al-Sabah, will set May 17 as election date. Jassem al-Kharafi, speaker of the dissolved house, had been told the decision but state media had yet to publish the official decree, they added.

Lawmakers said Sheikh Sabah, who has the last say in Kuwaiti politics, would announce the dissolution and call a new poll in a televised address later on Wednesday.

"The decree is expected tonight," Deputy Speaker Mohamed al-Bosairi told reporters.

The decision followed the resignation of the cabinet on Monday, less than a year after it was sworn in, complaining of a lack of cooperation from the assembly.

The standoff had paralyzed political life and delayed key economic reforms in the major OPEC producer and key U.S. ally.

Kuwait's stock market rallied to an all-time high on Wednesday. The main index rose 1.5 percent to 14,450.40 points.

The cabinet resignation left Sheikh Sabah with two options under the constitution: to order the formation of a new cabinet or to dissolve parliament and call new polls within two months.

This is the fifth time the parliament has been dissolved in the former British protectorate since the house was set up in 1963. Sheikh Sabah's predecessors suspended the assembly for six years in 1986 and five years in 1976.

The emir cut short a holiday to Morocco and returned late on Tuesday to deal with the crisis, holding urgent consultations with Kharafi, Crown Prince Sheikh Nawaf al-Sabah and Prime Minister Sheikh Nasser al-Mohammad al-Sabah.

"This is a wrong decision," Mohammad Jassem al-Saqr, the head of parliament's foreign affairs committee told Al Jazeera.

The emir had repeatedly urged deputies and the government to work together for the sake of the country, but to little avail.

Parliament had made progress approving long-awaited reforms such as a reduction in taxes on foreign firms and privatization of the loss-making national airline. But tensions flared again on Sunday when lawmakers demanded a new raise for public sector employees who comprise over 90 percent of working Kuwaitis.

The demands put parliament on a collision course with the cabinet which raised salaries in February to counter inflation.

A bill to set up a financial regulator and open up the stock market to more foreign investment has been stalled in the house.

Deputies have also forced the cabinet to set up a fund to buy back bad debts Kuwaiti nationals incurred from shopping sprees, in a blow to plans to reduce dependence on the state.

Kuwait has yet to name an oil minister to replace Badr al-Humaidhi, who resigned days after his appointment in November under pressure from hostile deputies. The previous cabinet had resigned to avert a parliamentary no-confidence vote in the then health minister, a member of the ruling family.

Parliamentary deputies have to approve the state budget and all key laws and exercise their right to question ministers.

Parliament passed a law in 2005 giving women the right to vote and run in elections.

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