Kuwait’s financial, external budgets powerful

Fitch, the global credit rating agency said downgrading of Kuwait’s long-term rating from AA to AA- is the result of the ongoing impasse in political decision-making process and structural challenges related to the massive dependence on oil, the generous welfare state and a large government sector, reports Al- Rai daily.

Fitch stated that Kuwait’s financial and external balance sheets are still among the strongest sovereign governments rated by the agency, despite the sharp fluctuations in oil prices since 2014.

The agency added there is crystal-clear absence of any serious financial adjustment to the recent oil price shocks, while the prospects for reforms are still weak, despite some positive political developments within the framework of the national dialogue, pointing out in her report that political divisions still exist, despite the national dialogue, likely to hinder Any broader reforms of Kuwait’s fiscal stalemate.

As for the public debt law, Fitch feels the law will be agreed upon this year, although some uncertainty lingers on and even without a public debt law, sources say, the government will still be able to meet its financing obligations.

Fitch expected the general government deficit to shrink sharply to 1.6 percent of GDP in fiscal year 2021 from 20.6% of GDP in fiscal year 2020. This includes the estimated investment interest income of the General Investment Authority, which has not been officially disclosed.

The agency expects revenue to grow by more than 50 percent (after declining 32 percent in fiscal year 2020), to reach KD 21.8 billion, driven by a 75 percent increase in oil prices and a slight increase in production.