Kuwaiti governor resigns after 25 years as chief

Sheikh Salem AbdulAziz Al-Sabah has resigned as governor of the Central Bank of Kuwait. The state media agency, Kuwait News Agency (Kuna), issued a confirmation of his departure on February 13.

Despite Kuna not offering a reason for the governor's resignation, local media immediately began reporting that political tensions were the cause. Al-Sabah had been governor since 1986 but had faced new challenges in recent months as central bank employees protested over employment conditions and pay.

On September 7, 2011, the minister of state for cabinet affairs and government spokesman, Ali Al-Rashed, announced large increases to salaries and allowances of Kuwaiti workers and salaries of non-Kuwaitis in the oil sector. With senior workers receiving up to a 66% rise, workers in other public sectors were quick to also demand more from the government.

The government-backed Al Qabas newspaper said Al-Sabah had objected to rising public spending, including the substantial wage increases for oil workers.

Kristian Coates-Ulrichsen, Kuwait Research Fellow at the London School of Economics and an expert on Gulf politics agrees that the rising government expenditure is unsustainable.

"Kuwait was the very first Gulf country to begin the unproductive policy of cash handouts last January, and the short-term measures have since been far exceeded in order of magnitude by Saudi Arabia," says Coates-Ulrichsen. "But it's very controversial in Kuwait as it directly contradicts longer-term attempts to transition toward competitive economies. And it has a momentum of its own, as seen in the strike wave last year."

The governor's resignation also leaves the Financial Stability Board's regional consultative group for the Middle East and North Africa without a co-chair. Al-Sabah attended the first meeting of the group, held on January 20 in Abu Dhabi. He was co-chair alongside Fahad Al-Mubarak, governor of the Saudi Arabian Monetary Agency.

The central bank could not be reached for comment.