Sheikh Sabah has been abroad as the cabinet crisis was brewing
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Kuwait's ruler has dissolved parliament amid a political crisis that has prompted the entire cabinet to tender its resignation.
Fresh elections in the oil-rich state are to be held on 17 May.
Sheikh Sabah announced the decision, after cutting short a private visit to Morocco to deal with the crisis.
Kuwait's parliament has been involved in a series of disputes with ministers, which came to a head with the cabinet's resignation on Monday.
MPs had been demanding a further pay rise for state employees - something the cabinet was against.
Correspondents say constant political clashes between the cabinet and parliament have delayed planned economic reforms.
Sheikh Sabah made the announcement in an address to the nation on state television.
Under Kuwaiti law, elections must be held within 60 days of a dissolution of parliament.
But in the past, parliament has been suspended for much longer - five years between 1976-81, and six years between 1986-92.
The elections in 2006 resulted in a loose alliance of reformists and Islamists securing nearly two-thirds of the seats in parliament.
MPs have accused the ruling Sabah family of trying to lay all blame for the impasse on parliament and some have called for changes in the executive branch dominated by Sabah family members.
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