The Central Bank of Kuwait has recently announced new measures regarding the purchase of dollars by local banks and exchange companies. In an effort to prevent speculation and investment activities, the Central Bank has informed the banks that it will not cover dollar purchases if they are intended for speculative or investment purposes. However, the Central Bank will continue to provide any quantities of dollars that are directed towards covering the needs of customers for money transfer operations.
The Central Bank’s directive emphasizes that local banks can still purchase dollars from the Central Bank to fulfill their customer transactions, as they currently do. However, banks must ensure that the amounts purchased in dollars are primarily used to cover the transactions of exchange companies, specifically for meeting the needs of their customers. Any dollar purchases made for purposes other than this must be covered by the bank’s own resources.
It is important to note that any purchases of dollars by banks or exchange companies for investment, commercial, or speculative purposes must be covered using their own resources. This can include using their existing stock of dollars or purchasing them through the open market or alternative options, separate from the Central Bank’s support. The Central Bank’s role is primarily to provide foreign currency to meet the needs of banks, similar to other central banks in the region that follow a fixed exchange rate with another currency.
The exchange policy followed by the Kuwaiti Central Bank aims to maintain the relative stability of the dinar’s price against other currencies. According to this policy, the Central Bank sets the dinar’s exchange rate based on a special weighted basket of currencies from countries that have significant commercial and financial relations with Kuwait.
The implementation of this policy has proven effective in achieving a high degree of relative stability in the dinar’s exchange rate against major global currencies. By regulating dollar purchases and ensuring their proper usage, the Central Bank aims to maintain the stability of the Kuwaiti dinar and safeguard the country’s financial system.
These measures by the Central Bank of Kuwait reflect its commitment to maintaining a stable financial environment and preventing any potential risks associated with speculative or investment activities. By providing clear guidelines to banks and exchange companies, the Central Bank aims to ensure the responsible and efficient use of dollars in the country’s financial transactions.
It is important for both local and international audiences to understand the context and implications of these measures. The Central Bank’s actions align with its mandate to protect the stability of the Kuwaiti currency and promote a secure financial system. By emphasizing the need for banks and exchange companies to use dollars for their intended purpose, the Central Bank aims to prevent any misuse or excessive speculation that could potentially impact the country’s economy.
Overall, the Central Bank of Kuwait’s decision to regulate dollar purchases demonstrates its proactive approach in maintaining a stable financial environment. By providing clear guidelines and ensuring responsible usage of dollars, the Central Bank plays a crucial role in safeguarding the country’s financial system and promoting economic stability.
Source: TimesKuwait
