It’s looking more and more precarious to be a member of the cabinet in the Middle East and North Africa… at least in terms of job security. Along with new subsidies, public housing investment and public sector wage hikes, cabinet shuffles have emerged a primary tool for rulers to deflect criticism, signal a policy change (even if one is not forthcoming) and to stall for time. Last week both the Syrian and Kuwaiti cabinets resigned in the face of political pressure. This follows resignations in Jordan, Egypt (several), Tunisia and Lebanon, the latter because Hezbollah withdrew from the inactive parliament back in January.
While the drivers of these shuffles differ, and some (Lebanon and Kuwait) reflect largely domestic idiosyncrasies, on net shuffles could defer implementation of policy, passage of reforms, and increase domestic and foreign investor uncertainty. Kuwait, like Jordan, has made a habit of cabinet shuffles and parliamentary elections in the last decade, in part as an escape valve for the leadership. At the very least these shuffles will dampen the ability of governments to respond to changing events and could increase the tendency to implement populist measures, given that ministers know that their careers may be at stake if they lose popular support. These shuffles moreover will further defer infrastructure development and capital spending in favor of current spending.
For Kuwait, the situation is relatively par for the course. Kuwait has had frequent elections and cabinet shuffles, often timed to avoid potentially embarrassing questioning of ministers by the parliament. In fact, Kuwait’s PM had only recently survived a vote of non-confidence linked to MPs protesting a constitutional change that would have stripped them of immunity in civil suits. Kuwait’s parliament, one of the region’s more powerful legislatures, has the ability to query question and approve legislation, but not necessarily to propose it. It also reviews, comments on and criticizes the asset allocation and performance of the country’s sovereign wealth fund, the Kuwait Investment Authority (KIA) which just last week announced plans to allocate a small share of funds to local property markets. We expect that Kuwait will come under more pressure to allocate government resources domestically.
We do not expect a major change, with the PM and many key ministers likely to be retained in the replacement cabinet, and policies likely to remain unchanged. These shuffles have tended to bring little change, with the last five shuffles retaining the same prime minister. What is new however, is the willingness of the Kuwaiti government to blame Iran. Direct Iranian intervention seems unlikely in Kuwait, but Kuwait has long had simmering sectarian divides and in fact has the largest Shi’a population in the GCC after Bahrain. Unlike in Bahrain, there is less evidence of a systematic lack of access to resources and jobs. However, the pickup in anti-Iran rhetoric of late seems to be a part of the new GCC solidarity pact.
Moreover, the development could exacerbate the delays to Kuwait’s development plan, which we view as a significant risk to Kuwait’s domestic investment. Already approved transfers to citizens and free food will support consumption, and we expect little change to the growth forecast laid out in our march outlook. Kuwait continues to have space to spend more – as it is still the most fiscally conservative GCC country.