Fitch affirms Kuwait credit rating at AA - with a stable outlook

The Central Bank of Kuwait (CBK) expressed its approval for the Fitch Ratings report, which affirmed Kuwait s long-term foreign-currency issuer default rating (LTFC IDR) at AA- with a stable outlook. The report highlighted Kuwait s heavy reliance on oil, generous welfare system, and large public sector, which could pose sustainability challenges in the long term. However, it also noted that Kuwait s external balance sheets are the strongest among Fitch-rated sovereigns. Fitch projected that Kuwait s sovereign net foreign assets will increase to 538 percent of GDP in 2024 and an average of 553 percent in 2025-2026. The report also mentioned the implementation of structural reform plans, focusing on diversifying oil revenue, improving government efficiency, and capping medium-term expenditure at KD 24.5 billion (48 percent of projected GDP for FY24). The draft liquidity/debt law is expected to be passed in the coming fiscal year (FY2025-2026), enabling Kuwait to raise new debt after the expiry of the previous debt law in 2017. Fitch anticipates the government will continue to meet its financing obligations, even without the liquidity law, due to its assets. The budget deficit is projected to widen to 4.4 percent of GDP in FY24 and further to 6.0 percent in FY25. The government plans to rationalize spending by reducing non-core expenditures and under-spending the budget. However, significant reform of public employment and welfare spending is unlikely, keeping total expenditure near the target ceiling. Fitch forecasts a decline in oil revenues and a modest rise in non-oil revenues. The government will continue to rely on the General Reserve Fund (GRF) to cover the budget deficit and meet domestic maturities. Fitch expects the government to resume borrowing, with about 30 percent of the

Source: arabtimesonline.com
Published on 2024-09-14