Ratings agency S&P Global Ratings cut Kuwait's rating by one notch citing the Gulf state's lack of a funding strategy to finance its deficit.
20 July 2021, 12:00 AM
31 July 2021, 12:00 AM
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.