Fitch Downgrades Kuwait to AA-; Outlook Stable

Fitch Ratings said on Thursday it downgraded Kuwait's credit rating to 'AA-' from 'AA', citing "ongoing political constraints" that hinder the oil producer's ability to address structural problems.

Kuwait's heavy dependence on oil, an expansive welfare system and a large public sector are structural issues that need to be addressed, Fitch said.

The credit rating was cut one level to AA-, the fourth-highest investment-grade level at Fitch, according to a statement on Thursday.

Constraints on decision-making has hindered “addressing structural challenges related to heavy oil dependence, a generous welfare state and a large public sector,” Fitch said.

Years of political tensions have stymied efforts to diversify the economy of Kuwait, home to about 8.5% of the world’s oil reserves, and promote foreign investment. The government has been unable to borrow since its debut Eurobond in 2017, forcing it to rely on its General Reserve Fund instead.

"There has been a lack of meaningful underlying fiscal adjustment to recent oil-price shocks and the outlook for reforms remains weak, despite some positive political developments as part of a national dialogue," Fitch added.