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Kuwait formally dissolved parliament in a decree issued on Tuesday, state news agency KUNA said, as the Gulf Arab state's crown prince moved to resolve a standoff between the government and elected parliament that has hindered fiscal reform.

Last month Crown Prince Sheikh Meshal al-Ahmad al-Sabah, who took over most of the ruling emir's duties, said he was dissolving parliament and would call for early elections. On Monday he approved a cabinet headed by a new prime minister.

"To rectify the political scene, the lack of harmony and cooperation ... and behaviour that undermines national unity, it was necessary to resort to the people...to rectify the path," Sheikh Meshal said in the decree dissolving parliament.

Political stability in Kuwait, an OPEC oil producer, has traditionally depended on cooperation between the government and parliament, the Gulf region's most lively legislature.

The previous government resigned in April ahead of a non-cooperation motion in parliament against Prime Minister Sheikh Sabah al-Khalid, who late last month was replaced as premier by the current emir's son Sheikh Ahmad Nawaf al-Sabah.

Kuwait bans political parties but has given its legislature more influence than similar bodies in other Gulf monarchies.

Deadlock between government and parliament in Kuwait has often led to cabinet reshuffles and dissolutions of the legislature over the decades, hampering investment and reforms. The last time parliament was dissolved was in 2016. (Reuters)