VZCZCXRO5342
PP RUEHDE RUEHDIR
DE RUEHKU #0488/01 1261202
ZNR UUUUU ZZH
P 051202Z MAY 08
FM AMEMBASSY KUWAIT
TO RUEHC/SECSTATE WASHDC PRIORITY 1340
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEHDE/AMCONSUL DUBAI 0745

UNCLAS SECTION 01 OF 02 KUWAIT 000488 
 
SIPDIS 
 
SIPDIS 
 
PASS TO EEB/TPP/ABT/ATP JANET SPECK; NEA/ARP; ATO DUBAI FOR 
DWILLIAMS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD KU
SUBJECT: IMPACT OF RISING FOOD/COMMODITY PRICES - KUWAIT 
 
REF: STATE 39410 
 
KUWAIT 00000488  001.2 OF 002 
 
 
¶1.  Summary: Rising food prices and agricultural commodity 
prices are having a significant impact on the economy in 
Kuwait, especially with regard to inflation.  Kuwait has 
experienced an almost 60 percent increase in food prices in 
the last year.  Prices have dramatically increased in the 
past few months.  The GOK has taken some steps to reduce the 
burden of the price increases on local families.  The impact 
of the price increase has mostly impacted expatriates (who 
make up approximately two-thirds of the residents of Kuwait) 
as Kuwaiti nationals benefit from a system of food subsidies. 
 A few recent government initiatives such as eliminating the 
requirement for importers to use an agent or distributor may 
help increase import of food and agricultural goods into the 
country and reduce prices in the market.  An across-the-board 
pay raise for Kuwaiti nationals of 120 Kuwaiti Dinars (KD) 
(450 USD) and 50 KD (190 USD) for expatriates has also 
nominally helped mitigate the rapidly rising cost of living 
in Kuwait.  End Summary. 
 
¶2.  Prices of basic food items like rice, potatoes, milk and 
corn oil have risen by a minimum of 40 percent and as high as 
60 percent in some cases.  The price of rice has risen from 
200 fils (76 US cents) per kilogram (kg) to 400 fils (1.52 
USD) per kg.  This is a 100 percent increase in price over 
the last year.  The price of potatoes has risen from 400 fils 
(1.52 USD) per kg to 650 fils (2.47 USD) per kg.  The price 
of corn oil has risen by 46 percent, from 650 fils per liter 
to 950 fils per liter (3.60 USD).  Flour has also risen by 
approximately 25 percent to 150 fils per kg (57 US cents). 
 
¶3.  The government of Kuwait has subsidized prices of main 
staples such as rice, sugar, flour, bread, powdered milk, 
edible oils and lentils for a number of years.  Kuwaiti 
nationals benefit from this arrangement.  Every Kuwaiti 
family is issued a government ration card that enables them 
to receive a monthly ration of subsidized staples.  For a 
government paid commission of five percent, the Kuwait Flour 
Mills and Bakeries Company purchases and stores staple goods 
through public tenders and delivers the products to assigned 
distribution centers.  Expatriates, including the unskilled 
labors from poor countries like Bangladesh and India, are not 
eligible for this program. 
 
4Q Following is a chart of subsidized prices of staples that 
are available to Kuwaiti nationals: 
 
Item         Subsidized price  Market Price      Difference 
             (in KD)         (in KD)           (in KD) 
--------------------------------------------- ----------------- 
Milk Powder  1.05 (4.00 USD)  5.5 (21 USD)      4.45 (17 USD) 
Rice         0.12 (0.45 USD)  0.35 (1.30 USD)   0.23 (0.87 
USD) 
Sugar        0.09 (0.35 USD)  0.15 (0.57 USD)   0.06 (0.23 
USD) 
Lentils      0.25 (0.95 USD)  0.5 (1.90 USD)    0.25 (0.95 
USD) 
Corn Oil     1.05 (4.00 USD)  2.0 (7.60 USD)    0.95 (3.60 
USD) 
(2 ltrs) 
 
¶5.  On February 19, the Ministry of Commerce and Industry 
issued a regulation that allows import of food items by any 
importer without the need to use a local agent or 
distributor.  This measure is intended to stimulate import of 
food staples from not just the region but from around the 
world.  In March, after months of debates over actual rates, 
the GOK announced an across-the-board pay increase for 
Kuwaiti nationals of 120 KD per month (450 USD) and 50 KD per 
month (190 USD) for expatriates.  This pay increase, which is 
injecting new inflationary pressure into the economy, applies 
to both the public and private sectors.  In April, the GOK 
announced plans to maintain a food reservoir to address 
continuing public concern over rapid inflation, especially in 
food prices. 
 
¶6.  Kuwaiti consumer cooperative societies, which account for 
70 to 80 percent of retail food sales, have declared that 
they are trying to curb price increases by eliminating the 
middleman and buying directly from suppliers.  The 
cooperatives are reportedly sending buyers to countries in 
Asia, Europe and Africa in an effort to negotiate agreements 
and possible price concessions with major food exporters.  So 
far this effort constitutes only a public relations gesture, 
and it is impossible to predict what impact, if any, it will 
have. 
 
********************************************* * 
 
KUWAIT 00000488  002.2 OF 002 
 
 
For more reporting from Embassy Kuwait, visit: 
http://www.state.sgov.gov/p/nea/kuwait/?cable s 
 
Visit Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
********************************************* * 
Jones