#Kuwait’s financial, external budgets powerful: Fitch

Kuwait’s financial, external budgets powerful: Fitch

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.

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.

However, difficulties in passing the law and institutional stalemate have forced the government to rely on temporary measures, considering this reliance unusual for Kuwait’s rating level. 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. According to its estimates, the position of Kuwait’s net sovereign foreign assets is more than 500 percent of GDP, which is the highest among all sovereigns rated by “Fitch” and 10 times the average of governments with “AA” rating. Fitch said total government debt/GDP is low and expects it to fall to 10% of GDP in the fiscal year ending March 2022 (Fiscal Year 2021). However, the agency expects the budget deficit to widen in the coming years and government debt to rise to 50 percent of GDP over the medium term.