Kuwait: Kuwait’s foreign and local currency sovereign credit ratings have been affirmed at AA- with a stable outlook by Fitch Ratings, driven by strong fiscal and external balance sheets. 

An AA- rating from Fitch indicates minimal default risk, demonstrating a strong ability to meet financial obligations. 

“Kuwait’s fiscal and external balance sheets remain among the strongest of Fitch-rated sovereigns,” said the credit rating agency.  

The report, however, added that the assessment is marginally curbed by Kuwait’s significant reliance on oil.  

“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,” stated Fitch.  

The US-based agency added that Kuwait’s fiscal and external balance sheets remain among the strongest of Fitch-rated sovereigns. 

The report further projected that Kuwait’s sovereign net foreign asset position will average 529 percent of gross domestic product in 2024-25. 

It noted that conflicts between the elected parliament and the 15-member cabinet are a recurring feature of Kuwaiti politics, resulting in frequent resignations of ministers and dissolutions of parliament. The most recent dissolution in February led to elections scheduled for April 4. 

“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,” said Fitch.  

The assumption highlights Fitch’s view that the rating remains resilient to a moderate increase 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,” the report added.  

The rating agency expects an average oil price of $79.8 per barrel for the financial year 2024, representing a 5 percent dip compared to 2023.  

“In the financial year 2025, we assume Kuwait’s average oil price will fall to $71 per barrel and that its crude output will rise to 2.66 million barrels per day, assuming that OPEC+ (Organization of the Petroleum Exporting Countries and its allies) loosens production constraints somewhat,” stated the report.  

It added that gross government debt remains low, estimated at 3.1 percent of GDP in the financial year 2023, and it is expected to rise to 11 percent of the GDP by 2025.