Inflation busts faith in governments

It is failing cooperatives, it is greedy supermarkets, it is ineffective government policies, it is imbalances in public and private sector pay. Whatever it is, the facts on the ground are that the cost of living is increasingly expensive. Consumers in Kuwait claim the price of basic foodstuffs has risen as much as 40 per cent in the past three months.

With the official inflation rate at 7.3 per cent in October, Kuwait Times says the price of staples (cooking oil, rice, eggs, fresh milk) has shot up and that low-income families are struggling to pay the bills.

Kuwait, which depegged from the dollar last summer and has since seen its currency appreciate by 5 per cent, is suffering more than most Gulf countries. But it is not a unique case. Every one of the GCC states has moved to tackle inflation; none appear to have a grip on it.

Inflation is a real threat to the stability of the Gulf’s economies. In a region where the national governments are expected to manage and provide for, letting prices run out of control undermines confidence in governments’ ability. It doesn’t help that oil prices are producing a windfall for the state coffers – ‘how can household budgets by squeezed when the country is now so rich?’

It doesn’t much the expat community. Not everyone is here for the money, but if conditions are better back home there must be a temptation to leave. It will be harder to attract talent if costs spiral. Paying higher wages has been the go-to strategy. Those days might be over.