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WASHINGTON — The US Congress approved an increase in the country’s debt limit through March 2015, bowing to President Barack Obama’s demands to extend federal borrowing authority without conditions, but only after a dramatic Senate vote on Wednesday.

Final action in the Senate followed an hour-long nail-biting procedural tally forced by the objections of Republican Ted Cruz, a conservative Tea Party favourite. It appeared at first there would not be enough Republicans to join the Democratic majority and advance the bill.

A decision by Senate Republican leader Mitch McConnell and Senate Republican Whip John Cornyn, who are both up for re-election this year, to vote to advance the measure appeared to kick the procedural tally over the needed 60 votes.

After a few more tense minutes of huddling on the Senate floor, several other Republicans changed their votes to follow their leadership. In the end, 12 Republicans joined Democrats in advancing the bill, on a vote of 67-31.

The measure, which then passed the Senate on a final, party-line vote of 55-43, now goes to Obama to be signed into law.

The House of Representatives, where Republicans hold a majority, passed the measure in a close vote a day earlier, after Republicans dropped the confrontational tactics they had used in similar votes over the past three years.

The advance of the measure this week has brought relief to financial markets. Investors were becoming increasingly jittery ahead of February 27, the date by which the US Treasury had been warning its borrowing authority would be exhausted, putting federal payments at risk.

Without an increase in the statutory debt limit, the US government would soon default on some of its obligations and have to shut down some programmes, a historic event that would have likely caused severe market turmoil.

Reaction in most financial markets to the drama on the Senate floor was muted, with US stocks holding near the unchanged mark on the day and most US Treasury debt prices remaining modestly lower for the session.

But there was visible relief in the short-term interest rate market. The rate on the one-month Treasury Bill, which had jumped in the past week on concern over a protracted showdown over raising the debt ceiling, dropped to its lowest in three weeks, ending the day at just 0.01 per cent.

Obama welcomed the vote, but said Republican efforts to use the debt limit increase as leverage to achieve other policy goals had been damaging and should be abandoned.

Since 2011, Republicans have linked raising the borrowing cap to spending cuts or cutbacks to the president’s signature healthcare law, and the dispute at one point led to a downgrade of the pristine US credit rating.

“The full faith and credit of the United States is too important to use as leverage or a tool for extortion,” Obama said in a statement. “Hopefully, this puts an end to politics by brinksmanship, and allows us to move forward to do more to create good jobs and strengthen the economy.”

Treasury Secretary Jack Lew said in a statement that Congress’ action would boost economic growth by making businesses and investors more confident.

Cruz wanted conditions on debt ceiling

Obama and his fellow Democrats have demanded that the debt ceiling be raised without any conditions.

But Republican Cruz, whose influence helped push Congress into a government shutdown in October, objected to a simple-majority vote on the debt limit because he wanted to attach “meaningful conditions” that would help reduce US deficits.

Because of an approaching snowstorm, senators agreed to waive the required debate time and hold the procedural vote on Wednesday, with the final vote immediately following it.

After the results were in, some Republicans said their party was furious with Cruz for forcing a number of them to cast votes that could open them up to attacks from Tea Party conservatives opposed to any debt limit increase whatsoever.

“He accomplished nothing except forcing a number of Republicans to swallow hard and show some courage,” one aide remarked.

Both McConnell and Cornyn face conservative opposition in upcoming primary elections.

McConnell’s primary opponent, Matt Bevin, wasted no time in putting out a statement denouncing the senator’s move, saying: “Kentucky deserves a senator that will not keep voting to suffocate our children and grandchildren with trillions of dollars in debt.”

The Senate Conservatives Fund, a political action committee founded by ex-Senator Jim DeMint, also hit McConnell, tweeting that “Mitch McConnell just voted with the Democrats to advance yet another debt limit increase. Kentucky deserves better.”

Cruz, who is from Texas, made no apologies for his maneuver and said failure of the procedural vote would have presented an opportunity to address Washington’s spending problems.

“The next step would have been, I believe, that we would have come together to work on meaningful structural reforms to address the out-of-control spending,” Cruz told reporters.

Senator Bob Corker, a Tennessee Republican who cast a “yes” on the procedural vote, told reporters that after McConnell had voted for the measure, discussions took place on the Senate floor and then other Republicans stepped in to “help him out”.

Republicans who switched their votes from “no” to “yes” included Senator John McCain of Arizona, who joked later that his shoulder had been dislocated in arm-twisting on the Senate floor.

McCain said much of the discussion in the tense Republican huddles focused on getting past the debt limit to issues where Republicans could gain more political traction, such as healthcare.

“Nobody persuades me,” McCain said of his vote. “I just thought it was the right thing to do.”

TEL AVIV — Israeli conglomerates will offload billions of dollars worth of assets over the next few years to comply with a new law designed to promote competition and dilute the power of big business in a country where a few tycoons control much of the economy.

The move to redefine Israel’s corporate landscape comes after 400,000 people took to the streets in 2011, the largest protest in Israeli history, angered by the high cost of living.

The Business Concentration Law, which aims to break up some of the largest conglomerates and prevent the growth of new behemoths, could put about 40 firms worth 80-100 billion shekels ($23-28 billion) up for sale, according to Israeli corporate law firm Gross Kleinhendler Hodak Halevy Greenberg & Co. (GKH).

The reform, which was approved in December and is the latest in a swathe of new business regulations, should result in smaller holding companies with less debt, said Alon Glazer, head of research at Leader Capital Markets.

Some fear it could also push Israel’s biggest companies to look elsewhere for growth.

The expected surge in divestments looks set to cover a wide range of businesses, from insurers and banks to oil refiners and food companies. Some, including Israel’s second biggest insurer Clal Insurance and leading food company Tnuva, are already up for sale.

Potential buyers include foreign firms as well as private equity funds, possibly teaming up with local partners unable to buy on their own. Critics say the tighter regulatory environment in Israel could deter some investors, however, forcing sellers to lower their prices or float assets piecemeal on the stock market.

The law, which supporters say is an overdue strike against a select band of overmighty tycoons, grants conglomerates four to six years to sell the assets, but experts believe they will act early to avoid last-minute fire sales.

Pyramid power

Corporate power in Israel is more closely concentrated than almost anywhere else in the developed world, with the 10 largest groups controlling 41 per cent of the $200 billion-plus value of the 495 companies on the Israeli bourse.

Part of the problem has been that the biggest players have been able to build “pyramids” with tiers of holding companies, enabling wealthy individuals to control business empires while owning only a fraction of the equity in any given entity.

“A lot of assets are going to shake loose,” said one senior investment banker.

The lopsided influence of Israel’s financial elite dominated the political agenda in 2011 when the protesters took to the streets, demanding greater competition to lower costs for housing and basic goods.

In response to that pressure, Prime Minister Benjamin Netanyahu’s rightist government swiftly drew up a plan to open up markets and force service providers to cut consumer fees, along with a flood of regulations that affected almost every sector, from mobile phone operators to food makers.

A new generation of politicians promising to tackle vested interests were swept into parliament in 2013, including former TV personality Yair Lapid, who became finance minister in Netanyahu’s new government and has railed against “shameless tycoons”.

The new law will limit the pyramid conglomerates to two layers of listed companies and bar them from holding financial firms with assets of more than 40 billion shekels and non-financial businesses with more than 6 billion shekels of domestic revenue.

GKH Chairman David Hodak called the law a “big experiment” to curb private sector power in the economic and political field, saying: “A process of this kind happens in a country once in a very long while or as a result of a deep crisis.”

The case for breaking up the pyramids was helped by the insolvency of IDB Holding, the most layered of Israel’s conglomerates.

IDB Holding, with a market value of 26.8 million shekels, owns IDB Development, which in turn owns 74 per cent of holding company Discount Investment Corp., which holds 70 per cent of holding company Koor Industries. IDB Development also owns 55 per cent of Clal Insurance.

IDB has already agreed to sell a third of Clal to a group led by Chinese businessman Li Haifeng for 1.47 billion shekels and is also in the process of merging Koor and Discount as it moves towards becoming a two-layer pyramid.

Discount Investment in turn controls some of Israel’s most prized assets: 44 per cent of Israel’s biggest mobile phone operator, Cellcom, 48 per cent of leading supermarket chain Super-Sol, and 79 per cent of real estate developer Property and Building.

All are potential candidates in the big sell-off, though IDB said in a statement last month that the full impact of the new law was still unclear.

Another affected by the law is businessman Zadik Bino, who controls refiner Paz Oil and First International Bank, the country’s fifth-largest lender.

Grow elsewhere

According to Adir Waldman, of the Freshfields Bruckhaus Deringer law firm, many foreign clients, especially European private equity firms, had been sizing up the opportunities.

“They have a lot of money they need to put to work and have seen what firms like Apax did,” he said.

Britain’s Apax has invested more than $1 billion in Israel over the past eight years. However, Apex itself could be subject to the new restrictions and has held talks with China’s Bright Food over its 56 per cent stake in Tnuva, which could fetch an estimated $1.6 billion.

“There will be attractive opportunities, but there is high uncertainty for private equity in terms of regulation,” indicated one private equity source. “Unless we see a new mindset, I don’t think there will be a lot of new players.” Some say it could also have a chilling effect on homegrown growth.

“The regulator is basically saying, ‘We don’t want you to grow [in Israel]; we want people to come from abroad’,” said an investment source who declined to be named. 

SINGAPORE — Airbus claimed bragging rights as the Asia-Pacific’s dominant aircraft supplier this week, saying the region’s fast growing economies and rising passenger demand will continue to drive demand over the next 20 years.

The European plane-maker said that in 2013, it won 80 per cent of all new business in the Asia-Pacific with 379 firm orders.

It also delivered 331 new aircraft, or over half of all new planes that entered into service with the region’s airlines, it added.

Speaking at the Singapore Air Show, senior Airbus executives said they were optimistic about more orders from the region’s full-service carriers and budget airlines despite ongoing concerns about the health of emerging markets, many of which are located in the Asia-Pacific.

“The message from me is very clear. This [Asia-Pacific] is where the action will be for the industry in the coming years,” Fabrice Bregier, head of Airbus plane-making division, told a news conference.

There is demand for 11,000 aircraft worth $1.8 trillion in the 20 years to 2032, Airbus pointed out.

The total fleet size is expected to more than double to over 12,130 jets, based on average annual traffic growth of 5.8 per cent and replacement of nearly 3,770 aircraft in service today, it indicated.

According to the company, growing urbanisation means that 25 of the 89 mega-cities in 2032 will be in Asia-Pacific, where there will also be 90 cities with more than one million passengers.

China will also overtake the United States as the world’s largest domestic airline market by 2032, said Airbus sales chief John Leahy.

“There is no doubting the importance of the Asia-Pacific market both today and in the future,” he added.

Even though airlines from the emerging markets account for an increasingly large portion of its order book, Bregier said he is not too concerned about current worries regarding that market segment.

Airbus is also looking for more partnerships with companies in the region, Bregier remarked.

In China, where the company has a final assembly line in Tianjin for the current generation of the A320 family of aircraft, he noted that there remains the possiblity of assembling the upgraded re-engined A320neo variant.

Airbus has been promoting a “regional” variant of its A330 widebody aircraft, which it says will suit services between high-demand slot-restricted airports in countries like China.

Airbus received on Wednesday its first order of the year for its flagship A380 when leasing firm Amedeo signed an $8.3 billion deal for 20 of the superjumbos.

The purchase agreement, signed at the Singapore Air Show, put the European manufacturer on track to meet its target of 30 orders for the world’s largest passenger plane in 2014.

Airbus said more than 120 A380s are now in operation worldwide following its launch in 2007.

Leahy said the company wants about 30 orders for the A380 this year.

Airbus says it has received 814 orders so far from 30 countries for the A350-XWB, a wide-body plane due to begin service with Qatar Airways in the fourth quarter of 2014.

On Tuesday, fledgling carrier VietJetAir ordered 63 Airbus A320 jets with a list price of $6.4 billion in an expansion programme that underscores Asia’s central role in the future of world aviation.

The deal also covers rights to acquire or lease 38 more A320s, potentially boosting the budget carrier’s current fleet of 11 A320s tenfold.

Separately, the world’s biggest planemaker Boeing expects nearly half of the world’s air traffic growth will be driven by the Asia-Pacific region over the next 20 years, but is monitoring local currencies to assess airlines’ ability to meet orders.

Boeing forecast the fleet of aircraft in the region would triple in size over the next two decades, sparking demand for close to 13,000 more planes valued at $1.9 trillion.

Air travel has surged in the region, driven by a rise in disposable incomes and low air fares offered by budget carriers, notably in Southeast Asia.

But Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes, sounded a note of caution, saying market conditions were being monitored closely for any signs of overcapacity.

“We are watching what’s happening here in terms of currencies and in terms of economic growth,” he told Reuters television.

After years of explosive growth, the region’s budget carriers now face the possibility of overcapacity as deliveries accelerate, airlines expand into each other’s markets and currency weakness threatens to dent economic growth.

By the end of the year, airlines in Southeast Asia will have 1,800 planes, while their order book is set to surpass the 2,000 mark.

Boeing estimated Asia-Pacific’s fleet size would blow out to 14,750 over the next 20 years, from 5,090 in 2012.

“Asia Pacific economies and passenger traffic continue to exhibit strong growth,” Tinseth told a media briefing. “Over the next 20 years, nearly half of the world’s air traffic growth will be driven by travel to, from or within the region.”

Both Airbus and Boeing have committed to record production rates for their most popular models, but executives are closely watching the financial turmoil in key aviation markets, such as Indonesia and Thailand.

Asia Pacific is home to some of the world’s biggest long-haul carriers and budget carriers AirAsia and Lion Air have placed aircraft orders valued at billions of dollars and are among the biggest customers of Boeing and Airbus.

“They (low-cost carriers) have been able to provide a service to a part of the population that couldn’t fly before. And so what they are able to do is, to reach into a country and help stimulate demand, very similar to what a Southwest or a Ryanair did over time,” Tinseth indicated.

“Their growth is being bolstered by both the growth in income we see, growth in the economy, but also the fact that they are able to push their product into a greater base,” he said.

Flag carriers weigh orders

Full service carriers are also getting in on the act.

Singapore Airlines is weighing a potential order for up to 40 of wide-body jets as it compares Boeing’s revamped 777X against Airbus A350, sources familiar with the matter said.

The airline is looking at a potential order for as many as 40 777X aircraft in a deal potentially worth $15 billion at list prices, the sources said, asking not to be identified.

Garuda Indonesia is looking to tie up a long sought deal with Airbus for around 10 A330 aircraft, a source familiar with the matter said, echoing a Bloomberg report.

Tinseth said the boom in low-cost carriers and demand for intra-Asia travel have fuelled a substantial increase in single-aisle airplanes.

Boeing’s data projects that passenger airlines in the region will rely primarily on single-aisle planes such as the Next-Generation 737 and the 737 Max, a new engine-variant of the 737, to connect passengers. Single-aisle airplanes will represent 69 per cent of the new airplanes in the region.

Carriers in Southeast Asia are due to take delivery of about 230 aircraft worth over $20 billion this year.

“As we would move forward, we are going to be watching that capacity growth very closely and asking ourselves, ‘Will it change the yield market and the revenue market?’,” said Tinseth.

“We see the capacity that’s coming into the market within the bounds of our forecast, which is good but it’s aggressive growth. And so you have to watch, especially as they open up new markets, where those markets will be and whether they will be successful,” he added.

Thai budget carrier Nok Air on Wednesday committed to buy 15 B737s from Boeing worth $1.45 billion.

LONDON — World oil demand will rise slightly more than expected in 2014, the Organisation of the Petroleum Exporting Countries (OPEC) said on Wednesday, becoming the second major forecaster this week to predict higher fuel use as economic growth picks up in Europe and the United States.

In a monthly report, OPEC indicated that global demand will rise by 1.09 million barrels per day (bpd) this year, up about 40,000 bpd from its previous forecast. The group, which pumps a third of the world’s oil, also sees potential for further rises.

“Given the improvement in oil demand from the countries of the Organisation for Economic Cooperation and Development, the likelihood for upward adjustments for world oil demand growth in 2014 is currently higher than existing projections,” said the report by economists at OPEC’s Vienna headquarters.

OPEC’s report comes a day after the US government’s Energy Information Administration raised its 2014 world oil demand growth forecast by a similar increment. Oil prices edged higher after it was released, with Brent crude trading near $109 a barrel.

While the bulk of the growth in global oil demand continues to come from China and the Middle East, OPEC was more upbeat about the prospects for further fuel use this year in established economies.

OPEC sees a contraction in European demand — in the doldrums for years due to recession — easing in 2014, and said preliminary figures for December 2013 and January 2014 indicated strong demand in top consumer, the United States.

“The potential of the oil demand forecast for countries of the Organisation for Economic Cooperation and Development leans to the upside as the improving economic conditions in the US and Europe may turn out better than expected,” OPEC said.

“For other countries, risks are skewed to the downside due to fiscal and monetary issues,” it added.

According to secondary sources cited by the report, OPEC raised its own output to 29.71 million bpd in January, as a partial recovery in Libyan shipments — disrupted for months by unrest — was offset by cutbacks in top exporter Saudi Arabia.

But the stronger global demand outlook is not translating yet into higher demand for OPEC oil, as rising supplies including of US shale oil are eroding its market share in 2014.

OPEC raised its estimate of the amount of crude non-member countries are expected to produce this year to 54.14 million bpd, up about 50,000 bpd from the previous estimate.

As a result, OPEC expects demand for the crude pumped by its 12 members to average 29.60 million billion barrels, virtually unchanged and suggesting inventories will build up should the group keep pumping at January’s rate.

Another closely watched oil demand forecast is due on Thursday from the International Energy Agency (IEA), adviser to industrialised countries.

Last month, the IEA’s chief economist told Reuters on the sidelines of the World Economic Forum in Davos that Europe’s high gas prices risk driving away a big share of its energy-intensive industries such as cement and steel unless countries boost shale gas output and trim green subsidies.

“These industries are critical for the European economy as they employ over 30 million people and it could have a major knock-on effect on the European Union economy,” the IEA’s Fatih Birol said.

Concern among European Union (EU) nations about the impact of energy costs on their already suffering industry is intensifying, with some member states debating a freeze on prices and stripping away renewable subsidies.

Gas prices in Europe are around three times higher than those in the United States thanks to a shale gas boom that has seen US output soar, while European consumers increasingly rely on imports from Russia and Norway as domestic fields age.

Tackling the continent’s rising energy bills requires a wide-ranging approach, Birol stressed.

Not only must European countries renegotiate gas contracts — two-thirds of which will expire in the next decade — to get more favourable terms, but they should also boost production of unconventional gas resources such as shale, he said.

EU regulators have already said they are preparing to charge Russian gas export monopoly Gazprom with abusing its dominant position in central and eastern Europe.

They have voiced concern that Gazprom imposed unfair prices by linking gas to oil prices, helping to keep tariffs high, especially to nations most reliant on Russian gas.

The EU should also consider trimming the $60 billion it spends annually on subsidising renewable sources of electricity generation, such as wind and solar.

“In some cases, it is excessive and puts an unnecessary burden on consumers,” Birol said.

The policy recommendations, which also include introducing energy-efficiency measures to cut consumption, follow pleas from industry, which argues energy policy has to focus on affordability.

But with the current gas price disparities between Europe and the United States, more European firms are considering relocating to take advantage of America’s cut-rate energy.

AMMAN — The industrial producers’ price index increased by 1.6 per cent in 2013 compared with 2012, according to Department of Statistics (DoS) figures.

The rise in the index resulted from the increase in the prices of manufacturing industries, while prices of mining industries and electricity production went down.

AMMAN — The president of Jordan Chamber of Commerce (JCC) on Tuesday discussed bilateral economic ties with the president of industry, commerce and trade services in Morocco’s Tangier region.

Talks covered investment opportunities and the need to boost trade volume between Jordan and Morocco.

AMMAN — The consumer price index (CPI), a measurement of inflation, rose by 3.4 per cent in January compared with the same month in 2013, according to the Department of Statistics (DoS) report. The report attributed the rise mainly to higher transportation, rents, clothes, education and vegetable prices.

TOKYO — Nissan said Monday its nine-month net profit jumped 18.4 per cent, capping a buoyant earnings season for Japan’s top three automakers thanks to a cheap yen and rising sales in North America and China.

Rival Toyota, the world’s biggest automaker, last week forecast a record annual profit with nine-month earnings more than doubling to $15 billion, after Japan’s number three Honda said its earnings surged almost 40 per cent.

The trio have been big winners over the past year as a sharp drop in the yen inflated exporters’ repatriated profits, further boosted by improved demand in key overseas markets.

Sales in China slumped in late 2012 and into last year as a Tokyo-Beijing diplomatic row sparked a consumer boycott of Japanese brands in the world’s biggest vehicle market.

Relations remain tense, but Japanese manufacturers have reported sales are returning to pre-dispute levels.

Nissan was particularly vulnerable as it counts on China for about a quarter of its sales and has been fighting off rivals, including General Motors and Volkswagen, to return to its pre-boycott 7.7 per cent market share.

In November, the new executive in charge of Nissan’s China business said the firm was struggling to catch up with rebounding demand, after a slow start in the first half of 2013.

The maker of the Altima sedan and luxury Infiniti brand has three plants in China with a local partner, and plans to open another factory this year.

On Monday, Nissan indicated that its net profit was 274.1 billion ($2.68 billion) in the April-December period, up 18.4 per cent, as profit in just the third quarter soared 57 per cent.

Global revenue of 7.27 trillion yen was up 19.7 per cent from a year earlier as Nissan pointed to a recovery in China as well as robust demand in Japan and North America.

‘Sluggish conditions’ in Europe

However, sales of 3.67 million vehicles were up just 1 per cent, as Nissan trailed its key Japanese rivals. Its Europe market struggled while Latin America and other parts of Asia turned down.

“Sales in Japan and North America helped offset emerging market volatility and sluggish conditions in Europe,” said the company’s chief executive Carlos Ghosn.

In November, Nissan downgraded its fiscal full-year profit outlook to 355 billion yen from 420 billion yen as higher-than-expected costs tied to vehicle recalls weighed on its bottom line.

The firm has announced a management shakeup on the heels of a broad restructuring at Renault, which owns more than 40 per cent of Nissan.

Ghosn has led an aggressive new product rollout plan, including resurrecting Nissan’s budget Datsun brand to woo a new generation of cost-conscious buyers in emerging markets.

However, Nissan has fallen behind Toyota and Honda while its bid to tap emerging markets has yet to be declared a success.

Toyota’s own developing-market focus was underscored Monday as it announced it will stop making cars in Australia, banging the final nail in the coffin of country’s auto industry.

Despite the buoyant figures so far, an April sales tax rise in Japan and a possible slowdown in US and Asian markets could put the brakes on sales for the Japanese auto sector, said Takaki Nakanishi, analyst and chief executive at Nakanishi Research Institute in Tokyo.

“The Japanese auto industry has been on the upswing thanks to the weak yen and strong demand in the US and Asia, including in Japan,” he added.

“But there are some negatives on the horizon. The sales tax hike in Japan will affect auto sales for sure, although I think the impact is likely to be limited. Also, the recent strong demand in Asia and America is likely to lose its momentum,” Nakanishi continued.

Gains from the weak yen will taper off, he remarked, while political unrest in Thailand, a major production base for Japanese automakers, could also dig into results.

Still, the upbeat results marked a firm recovery for Japanese automakers after the 2011 quake-tsunami disaster hammered production and disrupted their supply chains.

Separately, Nissan unveiled recently its version of London’s iconic black taxi, a market currently dominated by Chinese firm Geely.

Nissan claims its new 1.6-litre petrol engine taxi will be cleaner than the current diesel cabs being used in the British capital.

“The NV200 cab for London is part of Nissan’s global taxi programme, which also encompasses New York, Barcelona and Tokyo. The London version’s design is bespoke, reflecting the rich heritage and status of London’s black cabs,” the company said.

The new cab was first unveiled in August 2012, but after feedback from Mayor Boris Johnson’s office it has been redesigned to more closely resemble the black cab “face” with bigger headlights, a prominent taxi sign and a big front grille.

The new cab adheres to the strict regulations governing the capital’s black cabs — known officially as Hackney Carriages — including the required 7.6-metre turning circle.

The vehicle will be produced at Nissan’s existing plant in Barcelona and modifications will be added in Britain, home to the company’s huge Sunderland plant.

It will go on sale in London in December priced about £30,000 (49,250 euros, $36,000).

The company enters the market as the original maker of London’s famous black cabs finds a new life.

Chinese auto manufacturer Zhejiang Geely Holding Group last year rescued from bankruptcy what is now known as London Taxi Co.

KUWAIT CITY — Kuwait’s provisional budget surplus shrunk in the first nine months of this fiscal year as spending rose 18 per cent and income was unchanged, according to official figures released Sunday.

The provisional budget surplus dropped 11 per cent to 14.34 billion dinars ($50.7 billion,37 billion euros) at the end of December compared to 16.1 billion dinars in the same period of the previous year, according to figures posted on the ministry of finance website.

Spending in the nine-month period was 9.64 billion dinars compared to just 8.16 billion dinars in the same period of the previous fiscal year.

Kuwait’s fiscal year runs from April 1 to March 31.

Revenues in the first three quarters of the 2013/2014 fiscal year came in at 24 billion dinars, slightly less than the 24.26 billion posted in the same period of the previous year.

Oil income, which makes up over 92 per cent of total revenues, dropped slightly from 22.84 billion dinars in the 2012-2013 fiscal year to 22.2 billion dinars in the current year.

Spending on development projects has been hampered by political disputes in recent years, but picked up slightly in recent months with the award of a number of mega projects worth several billion dollars.

Kuwait is projecting spending in the current fiscal year, which ends on March 31, at 21 billion dinars, with revenues at 18.1 billion dinars, leaving a deficit of 2.9 billion dinars.

Kuwait has projected a deficit in each of the past 14 fiscal years but ended with large surpluses because it assumes a conservative price for oil.

In the previous fiscal year, the emirate posted an actual surplus of 12.7 billion dinars, following a record 13.2 billion-dinar surplus in 2011-2012.

Thanks to higher than expected income driven by firm oil prices, Kuwait decided for the second year in a row to transfer 25 per cent of revenues into the emirate’s sovereign wealth fund, the assets of which are currently estimated at over $400 billion.

Kuwait has a native population of 1.2 million, in addition to 2.7 million foreigners, and pumps about 3 million barrels of oil per day.

Separately, a parliamentary investigation into a Kuwait Airways plan to buy and lease aircraft from Airbus will not affect the deal, the state carrier’s chairwoman told a local newspaper in comments published on Sunday.

Kuwait’s parliament voted on Wednesday to investigate all contracts signed by state-owned Kuwait Airways, which is attempting its biggest overhaul since the 1990 Iraqi invasion.

Such parliamentary inquiries are common in Kuwait, where lawmakers in the Gulf state’s National Assembly often question large government projects and have delayed or scuppered them in the past.

Al Anba newspaper quoted Kuwait Airways Chairwoman Rasha Al Roumi as saying the deal would be completed without being delayed.

In December, the loss-making airline signed a provisional agreement with Airbus to buy 25 new aircraft in a deal worth $4.4 billion at list prices.

The order would include the purchase of 10 A350-900 and 15 medium-haul A320neo jets. The airline also aims to lease 12 aircraft from Airbus pending delivery of the new planes.

The two companies are now going over technical and legal aspects of the deal, Al Anba said. A final contract will only be signed when an internal Kuwait Airways commission gives the green light, it added.

A Kuwait Airways spokesman was not immediately available for comment on the report.

Politics and bureaucracy have long complicated Kuwait’s plans to modernise its infrastructure and compete as a Gulf financial hub.

The carrier has one of the oldest fleets in the Middle East and wants to take out of service 11 jets from its fleet of 17, in which the planes’ average age is 18 years.

KUWAIT — Kuwait’s policymakers face the uphill challenge of convincing citizens that despite hefty oil revenues, one of the world’s richest countries per capita needs to reduce spending to avoid a potential damaging budget deficit later this decade.

Long a topic of debate, the task has now fallen to new Finance Minister Anas Al Saleh, who said shortly after his appointment in January that a plan to review the lavish subsidy system should be ready later this year.

Thanks to subsidies, it costs as little as 5.2 dinars ($18.40) to fill an 80-litre petrol tank. Electricity costs just 2 fils (less than 1 US cent) per kilowatt hour, a fraction of what it costs to produce.

Economists say such cheap prices, available to Kuwaitis and foreigners alike, encourage waste. Building managers complain of people leaving their air conditioning on while they are on holiday so that their home is cool when they return.

But any marked reduction in subsidies could erode stability since Kuwaitis have a recent history of street protests and industrial action to voice dissatisfaction with the government of the US-allied Gulf Arab state.

“There will be a revolt in Kuwait,” said Abdullah Al Shayji, political science faculty chief at Kuwait University. “Kuwaitis will cope with anything, but don’t come too close to their wallets and chequebooks. They will really put up a big fight.”

In 2012, thousands of Kuwaitis marched against changes to voting rules and voiced anger about slow economic development. Public sector workers went on strike the same year over pay.

In a sign of how sensitive the subsidy subject is, Saleh has been on the defensive since announcing his plan, stressing that it will not hurt Kuwaitis with low and middle incomes.

“The government’s behaviour is very provocative for Kuwaitis because they don’t believe it,” said Shayji.

“You shouldn’t be touching this with a 10-foot pole at this stage, this is something that could sink the government,” he added. “Each Kuwaiti believes, deep down inside, he was raised to believe: I am entitled to the oil.”

In recent years, a steady rise in the oil price has helped the Organisation of Petroleum Exporting Countries (OPEC) producer pay for its growing wage bill, subsidies, a generous welfare system and a series of one-off handouts.

Such benefits, common in the Arab Gulf, are often credited with shielding Kuwait and its regional peers from the type of unrest which swept much of the Arab world in 2011.

They are difficult to reduce, despite warnings that spending at the current rate could outpace Kuwait’s revenues as early as 2017-18, according to the worst-case scenario from the International Monetary Fund.

“With risks to oil markets skewed to the downside, so are risks to the public finances,” said Farouk Soussa, chief Middle East economist at Citigroup, who says Kuwait needs to make progress on fiscal reform.

Enlightened new generation

Kuwait’s success with the subsidies review, or lack thereof, is relevant to other Gulf states which do not charge income tax and rely on a patronage-style system of handouts.

Work on the review started late last year in Kuwait, which relies on oil for over 90 per cent of revenues. Subsidies are expected to cost 5.11 billion dinars ($18.08 billion) next fiscal year to cover items like fuel and energy.

Saleh, who is in his early 40s, is part of a younger generation of ministers tasked with exploring such controversial economic reforms. He is the fourth finance minister in less than two years.

“He is one of a number of people who understands it. There are more people in the Cabinet who understand it now,” a diplomat said.

A former commerce and industry minister, Saleh helped push through a new companies law in 2012 aimed at boosting the private sector, a challenge in a country where implementing new systems takes years if not decades.

US-educated, with a business background, Saleh is taking a path backed by predecessor Sheikh Salem Abdul Aziz Al Sabah, who initiated the review and has led calls for spending cuts.

Sheikh Salem, who ran the central bank for 25 years, warned in January that the government would be forced to take damaging measures if spending continues unabated. He remarked that Kuwait might have to devalue the dinar or dip into its Future Generations Fund, a nest egg meant for economic shocks.

But many Kuwaitis are confused by the idea of shaving subsidies given the large budget surpluses of the past decade.

“Why do they do this? We have a lot of money and it is to our advantage. We should spend it,” said 20-year-old student Samaher Usama, who like more than half of Kuwaitis is under 25.

Some Kuwaitis see the logic in raising prices for goods and services, but they question the government’s method.

“They need to make a plan over five years and then look at developing different ways of producing electricity if they want to make it more expensive,” student Reem Al Asmi, 22, said.

She suggested Kuwait develop solar energy in order to reduce dependence on oil for its own energy consumption.

Talk about subsidies angers some who think Kuwait has been too generous abroad. It gave Egypt $4 billion as part of a Gulf aid package after the ousting of Islamist president Mohamed Mursi and donated $1 billion for humanitarian aid to Syria.

They also point to Kuwait’s potholed roads and housing shortage as evidence that the state is not using money effectively or that funds are disappearing elsewhere.

“There are influential people who take their fortune.” MP Saleh Ashour told parliament on February 4.

Some populist MPs are also part of the problem, campaigning to raise citizens’ benefits to win support from constituents.

MPs are calling for increases in allowances for housing and children. Last month they passed legislation to subsidise house-building materials.