The Kuwaiti dinar’s peg to a basket of currencies is coming under scrutiny as concerns grow that one of the world’s richest nations is running short of cash.
Derivatives are showing signs of pressure after 12-month forward contracts on the Kuwaiti dinar rose to about 280 points in the offshore market Wednesday, the highest since June. Most other Gulf currency forwards have declined this year as the recent recovery in oil prices eases the risks to their energy-dependent economies.
While other Gulf Arab states tapped global debt markets to bolster strained finances amid the pandemic, Kuwait has been hamstrung by lawmakers’ resistance to approve a law that would enable the government to borrow. Concern over how Kuwait will cover its budget deficit has become more acute after the government transferred the last of its performing assets to the country’s sovereign wealth fund in exchange for cash.
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