Fitch Ratings: Kuwait’s liquidity law boosts fiscal flexibility

Kuwait’s approval of a long-delayed financing and liquidity law is expected to improve fiscal flexibility and mitigate credit risks, Fitch Ratings stated. The move paves the way for an increase in government debt from its historically low levels, aligning with Fitch’s decision to affirm Kuwait’s sovereign rating at ‘AA-’/Stable on March 7.

With the suspension of parliament in May 2024, Kuwait’s Amir now holds the authority to approve draft laws by decree. Fitch anticipates the law’s swift approval following its endorsement by the Council of Ministers. Once enacted, the legislation will allow Kuwait to issue debt for the first time since the expiry of the previous public debt law in 2017. The initial proposal outlined plans to raise KWD 30 billion (USD 98 billion, or 62 per cent of Fitch-estimated GDP in 2024) over a 50-year period.

While Kuwait possesses substantial financial assets to meet its financing needs, the law will expand funding options and reduce the risk of liquidity pressures building up on the General Reserve Fund, the government’s treasury account.

Attribution: Amwal Al Ghad English
Subediting: M. S. Salama