Fitch Ratings maintained the credit rating of Kuwait’s long-term foreign currency bonds at “AA-” with a stable outlook.
Fitch Ratings said in its report that Kuwait’s rating is supported by its “exceptionally strong” financial and external balance sheet. On the other hand, the agency pointed out the limitations surrounding the classification, which are summarized in “Kuwait’s high dependence on oil, the generous social welfare system, the large public sector that may be difficult to maintain in the long term, and the political context that hinders efforts to deal with financial constraints.” and continuing economic.
Fitch expects Kuwait’s net sovereign foreign assets to average 529% of GDP in the 2024-2025 period, “remaining one of the highest rates among the countries the agency rates.” The bulk of the assets are held in the Future Generations Fund managed by the General Investment Authority, which also manages the assets of the General Reserve Fund, the government’s treasury account.
Regarding the political framework, Fitch said, “Conflicts between the elected parliament and the 15-member government are a recurring feature in Kuwaiti politics… and we assume that political divisions will continue to restrict the policy-making process in Kuwait.”
Fitch estimates that the government’s budget returned to deficit in FY23 (at 5% of GDP), after recording its first surplus (about 12% of GDP) in nearly a decade in FY2022. According to The government reporting agreement, which does not include the GIA’s investment interest income in revenues (and reflects the government’s financing needs). It explained that its estimated deficit is less than the government’s original expectations for the fiscal year 2023 budget deficit, amounting to 13.2% of GDP, due to higher oil prices than the specified budget and spending less than the budget.
Fitch assumed an average oil price of $79.8 per barrel for fiscal year 2024, down 5% from the previous fiscal year, while oil production is likely to remain broadly unchanged at 2.55 million barrels per day under OPEC+ restrictions. . The credit rating agency expected the average price of Kuwaiti oil to fall to $71 per barrel in the fiscal year 2025, with its crude production rising to 2.66 million barrels per day, assuming that OPEC+ may ease production restrictions to some extent.
