Kuwait's cabinet has approved Mohammad al-Hashel as the new governor of the country's central bank, promoting him from his position as deputy and marking the first change at the helm in over two decades. The 37-year-old replaces his former mentor Sheikh Salem Abdul-Aziz al-Sabah, a member of the ruling family who resigned last month after 25 years in the job, protesting at a rapid rise in government spending.
Hashel, who has a postgraduate degree in finance from Old Dominion University in Virginia, had been serving as Sheikh Salem's deputy since January 2009. "I think there will be continuation of policy because he trained under Sheikh Salem and he is one of his students," economic analyst Abdul-Rahman al-Humoud said. "Of course the difference will be in the experience. Sheikh Salem started as a junior employee in the central bank and he knew every detail, while Mohammad came just at the top ... but he is a very intelligent guy," Humoud, former vice president of Kuwait's Economic Society, said.
Hashel will be faced with the difficult task of trying to help manage the Gulf state's economy in the face of rising wage demands from labour unions. Kuwait airline workers and customs employees held strikes earlier this month over pay, grounding planes and delaying port traffic. His predecessor was concerned about Kuwait's dependency on oil for revenues and the global fallout of the euro zone crisis.
Hashel is a member of the technical committee of the Islamic Financial Services Board (IFSB), according to his biography posted on the central bank's website www.cbk.gov.kw. The Malaysia-based IFSB issues guidance for the Islamic financial services industry.
Kuwait pegs its dinar to an undisclosed basket of currencies of major trading partners, which is believed to be heavily US dollar-dominated. That makes the OPEC member's central bank keep its policy broadly aligned with US benchmarks although it is less exposed to the greenback's fluctuations than in the case of a direct peg.
Unlike fellow Gulf oil exporters, Kuwait dropped the direct dollar link in 2007 to rein in rising inflation, which climbed as high as 11.6 percent in August 2008. Sheikh Salem warned last month the government's failure to push through economic reforms had created imbalances that could become serious if high global oil prices fell back again, reiterating concerns about excessive budget spending.