The Kuwaiti government has warned its citizens to prepare for a period of economic austerity and rising prices in the face of declining oil revenues.

The finance minister Sheikh Ali al-Sabah told parliament that with oil prices halved compared to their peak last year, Kuwait's cash reserves could be used up over the next three years.

But the BBC Gulf correspondent says Kuwait which has ten per cent of the world's oil reserves is better positioned than some of its neighbours, with Iran and Saudi Arabia worst hit.