Press Releases

H.E. Sheikh Salem Abdulaziz Al-Sabah, Governor of the Central Bank of Kuwait (CBK) announced that based on the Council of Ministers' approval in its session of Sunday the 3rd of Jumada Al-Awal 1428 AH corresponding to the 20th of May 2007 AD, and starting from today, the determination of the exchange rate of the Kuwaiti dinar (KD) against the US dollar became based on a basket of major world currencies reflecting the foreign trade and financial relations of the State of Kuwait, and in a similar way to the policy applied before the 5th of January 2003.

In this connection, H.E. the Governor of CBK noted that the deep decline in the exchange rate of the US dollar against most other major currencies, which coincided with the start of application of the policy of pegging the KD exchange rate to the US dollar since the 5th of January 2003, had negative reflections on the Kuwaiti economy during the last two years. Despite CBK's attempts to alleviate the effect of the decline in the US dollar exchange rate against other major currencies, through exhausting the margin allowed for the upward movement of the KD exchange rate against the US dollar, the substantial decline of the US dollar exchange rate against the other major currencies along with the linkage of the KD exchange rate to the US dollar, contributed to the decline of the purchasing power of the KD against the rest of major currencies excluding the US dollar, thereby contributing to the rise in domestic inflation rates. Accordingly, this step comes within the CBK's efforts towards curbing the inflationary pressures on the domestic economy.

H.E. the CBK Governor added that in light of the sustained decline of the US dollar exchange rate against the other major currencies, and as the CBK exhausted all available means for accommodating the upward movement of the KD exchange rate against the US dollar, national interest considerations require un-pegging the KD exchange rate from the US dollar and reverting to the system of the special basket of currencies for the determination of the KD exchange rate. H.E. confirmed that whilst the dollar will continue to play a significant role in determining the KD exchange rate, the basket of currencies' system provides relative flexibility in exchange rate determination, thereby contributing to enhancing the resilience of the domestic economy to the sometimes sharp fluctuations in the exchange rates of major world currencies, particularly during the short term.

In closing his statement, H.E. the CBK Governor reaffirmed that the State of Kuwait fully supports and endorses the GCC common currency project, and shall continue to exert every effort towards its realization, and the removal of all obstacles hindering its launch as officially scheduled. Accordingly, until all technical, legislative and institutional requirements are fulfilled for the establishment of the GCC monetary union and the launch of the common GCC currency, the CBK will continue using the basket of currencies' system for the determination of the KD exchange rate.