S&P cut Kuwait's rating by one notch

S&P cut Kuwait's rating by one notch to A+ from AA-(minus) and kept its outlook on the country negative, it said in a statement late on Friday.

Hit hard by lower oil prices and the COVID-19 pandemic last year, Kuwait faces liquidity risks largely because parliament has not authorised government borrowing due to a standoff.

Kuwait's parliament approved the 2021-22 state budget on Tuesday but failed to quell a bad-tempered standoff between government and opposition that has blocked economic reforms and hampered decision-making at the Gulf state's sovereign wealth fund.

"The downgrade reflects a persistent lack of a comprehensive funding strategy despite the central government's ongoing sizeable deficits," S&P said.

"Due to parliamentary opposition, the government has so far been unable to pass a law giving it the authority to issue debt or gain immediate access to its large stock of accumulated assets".

S&P expects central government deficits to average 17% of gross domestic product annually between 2021 and 2024. In the fiscal year that ended in March, the country ran a central government deficit of 33% of GDP, S&P estimated.

Regardless of a lethargic pace of reforms, the agency said it still expected Kuwait to eventually adopt a debt law that would allow the government to borrow or overcome parliamentary opposition to gain access to funding alternatives.