Governor of the Central Bank of Kuwait Sheikh Salem Abdulaziz al-Sabah has said inflation in the oil-rich emirate, which has hit record levels, is mainly caused by external factors.
"Inflation in Kuwait is imported ... since the country imports most of its commodities from abroad," Sheikh Salem said in statements cited by the official KUNA news agency late Saturday.
External factors such as prices in exporting nations, insurance fees and transport costs influence Kuwaiti imports, said the governor, adding that 30 percent of Kuwaiti imports come from Europe and 14 percent from the United States.
"The only domestic factor affecting inflation is the rate of exchange of the dinar which is under control," Sheikh Salem said. In a bid to fight soaring inflation, Kuwait in May last year de-pegged the dinar from the US dollar and linked it to a basket of currencies. Since then, the dinar has appreciated about eight percent against the dollar.
National Bank of Kuwait, the largest bank in the Gulf emirate, predicted last week that inflation in OPEC's fourth largest producer would end the year at around 10 percent compared to 5.5 percent last year. Inflation hit a record high of 11.4 percent in April but dropped slightly to 11.1 percent in May, the latest available figure.
The Central Bank of Kuwait has in recent months tightened the screws on credit facilities in a bid to reduce liquidity levels. Sheikh Salem said that credit facilities grew at an average of 30 percent annually during the past five years, but by a modest six percent so far in 2008.