In view of the interdependence among all economic sectors, it is also essential to bolster this segment against fallout from other sectors affected by the current circumstances. Like other segments, the banking sector was affected by the lockdown, which caused a reduction in its capacity to extend financing, and we can also sense some reluctance to offer loans. Two factors are at play and are reducing efficiency of current measures regulating granting of financing; the first is banks’ preference – amid the current conditions – for granting financing to big companies with a strong financial position. This excludes a great number of companies affected by the crisis, which are in dire need of financing. The second is the continued gradual drop in banks’ willingness to grant financing as the crisis worsens and the cashflow problem escalates, as does its impact on companies’ solvency. All this comes as companies face an increasing need for financing. This scenario calls for taking the initiative and introducing comprehensive approaches to bolster this segment’s resilience and to incentivize it to extend more financing, which would guarantee sufficient cash flow across economic sectors and guarantee recovery through a comprehensive and integrated approach. In light of all of the above, the CBK had since March 2020 started to use its policy instruments to strengthen the sector’s resilience and to enable it to play a bigger role throughout this crisis; initiating macro-prudential measures and reducing regulatory requirements, thus expanding banks’ lending capacity to the range of KD 8-9 billion.
The impact would continue to grow as the crisis persists, since the cash flow crunch would force companies – including those previously in a good liquidity position - to shut down for failure to secure financing; either due to increasing financing costs or the banks’ reluctance to finance amid fears of growing default risk during the crisis. This could lead to companies’ bankruptcies, which, due to the chain effect between economic sectors could thus result in a contraction in non-oil GDP. The Committee’s Mandate To counter the impact and repercussions of the crisis on the national economy, the Higher Steering Committee for Economic Stimulus (The Committee), formed by the Council of Ministers Resolution (455) on 31 March 2020, and chaired by the Governor of the Central Bank of Kuwait, adopted a proactive approach to realize economic stability throughout the crisis. It laid down and initiated economic stimulus measures to prepare for the economic recovery stage that shall  Central Bank of Kuwait - Public ‫ عام‬- ‫بنك الكويت المركزي‬  -3-  follow once we overcome this crisis. Immediately afterwards, a national economic and structural reform plan needs to be launched and adopted by all the relevant stakeholders. The Committee listed several measures and governing principles to serve as a framework for all its activities, and they are as follows:  -  -  -  -  Introducing immediate remedies that provide practical and swift solutions to protect the national economy supporting economic reform and best possible resource allocation.