The pace of Kuwaiti bank lending is slowing this year as delays in government projects and loan defaults by local investment companies hamper demand for debt in Opec's fifth-biggest oil producer.
Loans to the private sector and banks' investments in bonds in Kuwait grew 0.3 per cent in the first six months of 2011, after a 1.9 per cent increase in 2010, according to data on the website of the nation's central bank.
Lending grew faster in neighbouring Saudi Arabia, the biggest Arab economy, and in the UAE and Qatar, as the region recovers from the impact of the global credit crunch.
Lawmakers in the Arabian Gulf nation have sought to question Prime Minister Shaikh Nasser Al Mohammad Al Sabeh over delays in the implementation of a 30.8 billion dinar ($113 billion), four-year plan approved in February last year aimed at modernising and restructuring Kuwait's oil-based economy.
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Some of the country's nearly 100 investment companies defaulted amid the credit crisis after the value of their assets collapsed and frozen debt markets prevented them from raising new loans.
"The oil sector doesn't need much external funding and without any aggressive non-oil expansion the demand just isn't there," Khalid Howladar, a senior credit officer at Moody's Investors Service in Dubai, said.
The problem with bad loans "are still being worked through and this overhang is still a source of uncertainty for the banks there," Howladar said.