Fitch Affirms Kuwait Rating At AA - Outlook Stable

(MENAFN- Kuwait News Agency (KUNA)) KUWAIT, March 15 (KUNA) -- The Central bank of Kuwait (CBK) said on Friday that Fitch Rating Agency affirmed on Kuwait's stable outlook, along with a rating of AA - which is "supported by its exceptionally strong fiscal and external balance sheets." A statement by (CBK) said the "rating is constrained by Kuwait's heavy dependence on oil, its generous welfare system, and large public sector that could be challenging to sustain in the long term, and a Political context that hampers efforts to tackle consistent fiscal and economic rigidities and approve legislation to allow debt issuance and clarify government financing sources." Kuwait's fiscal and external balance sheets remain among the strongest of Fitch-rated sovereigns.
"We forecast Kuwait's sovereign net foreign asset position will average 529 percent of GDP in 2024-25, remaining one of the highest among Fitch-rated sovereigns and more than 10x the 'AA' median.
The bulk of the assets are held in the Future Generations Fund managed by the Kuwait Investment Authority (KIA), which also manages the assets of the General Reserve Fund (GRF), the government's treasury account," the statement said.
"The incumbent government appointed in January 2024 before the dissolution of parliament by the new Amir, Sheikh Meshal Al-Ahmed Al-Jaber Al-Sabah, included a new prime minister and a largely technocratic cabinet.
The government's published four-year programme (2024-2027) focused on initiatives to enhance non-oil revenue, restructure subsidies and encourage private sector participation to create jobs for Kuwaitis and reduce the fiscal burden," the statement added.
"The plan also included passing a new liquidity law that would allow the government to relaunch debt issuance following expiry of the previous authorization in 2017.
However, these plans are similar to objectives of previous governments that failed to be implemented due to gridlock with parliament and we remain skeptical that this will change," the statement said.
"Liquidity Law Assumed but Uncertain: After the election, the government will aim to pass a liquidity law (as previous governments have), but parliamentary approval remains highly uncertain.
However, our forecasts, notably for government debt, are based on the assumption that a liquidity law is passed in the fiscal year ending March 2026 (FY25)," the statement added.
"The assumption illustrates that Fitch considers the rating to be resilient to a moderate rise in government debt.
In the absence of a liquidity law, Fitch believes the government would still be able to meet its limited debt service obligations in the coming years, given the assets at its disposal.
Low Debt, Likely to Rise: Gross government debt/GDP remains low, estimated at 3.1 percent of GDP in FY23," the statement said.
"Assuming the passage of a liquidity law in FY25, limited fiscal consolidation and lower oil prices, we forecast government debt will rise to 11 percent of GDP in FY25 and further in subsequent years.
Kuwait has an ESG Relevance Score of '5[+]' for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch's SRM and are, therefore, highly relevant to the rating and a key rating driver with a high weight," the statement added.
"As Kuwait has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile," the statement said.
"Kuwait has an ESG Relevance Score of '5[+]' for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch's SRM and are, therefore, highly relevant to the rating and are a key rating driver with a high weight. As Kuwait has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile.
Kuwait has an ESG Relevance Score of '4' for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver.
As Kuwait has a percentile rank below 50 for the respective Governance Indicator, this has a negative impact on the credit profile," the statement noted. (end) fnk

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