KUWAIT CITY, Sept 6: The Central Bank of Kuwait announced Friday that Fitch Ratings- one of the big three credit rating agencies- affirmed Kuwait’s long-term foreign-currency issuer default rating (IDR) at ‘AA-’ with a stable outlook. A CBK statement, received by KUNA, carried the following highlights from Fitch report: “Kuwait’s ‘AA-’ rating is supported by its exceptionally strong fiscal and external balance sheets, but is constrained by weaker governance than peers, heavy dependence on oil and its generous welfare system and large public sector, which could be a source of long-term fiscal pressure, despite spending rationalisation efforts, “The prospects remain uncertain for meaningful structural reforms to reduce reliance on oil revenue, although legislation has been approved to allow debt issuance and improve fiscal financing flexibility.” According to Fitch’s report, Kuwait’s external balance sheet remains the strongest of all Fitch-rated sovereigns. “We forecast its sovereign net foreign assets will rise to 607 percent of GDP in 2025, from an estimated 576 percent in 2024, more than 10x the ‘AA’ median,” reads the report.

“The bulk of assets is 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.” On the reforms, the agency said that the Kuwaiti government has begun implementing reforms that had stalled under previous administrations due to legislative gridlock. The government has approved a financing and liquidity law, allowing debt issuance for the first time since the previous law expired in 2017. The new law outlines plans to raise KD 30 billion (about USD 100 billion), equal to about 60 percent of GDP over the next 50 years. This will help alleviate pressure on the General Reserve Fund (GRF), support the development of local capital markets, establish a benchmark yield curve, and support development projects. It projected a surplus of 10 percent of GDP in FY25, up from 8.9 percent in FY24. It also expected the budget deficit to widen to 5.6 percent of GDP in FY25 (from 2 percent in FY24), compared with the projected ‘AA’ median of 2.6 percent, despite spending rationalisation efforts. “Nonetheless, we expect debt to remain well below the projected 2027 ‘AA’ median of 52.4 percent of GDP,” added the agency. It is projected that the real GDP to return to growth in 2025, expanding by 1.7 percent, after two consecutive years of contraction driven by OPEC+ oil production cuts. “We forecast annual inflation will remain below 3 percent in 2025-2027, although the central bank may be cautious about additional rate cuts given rising geopolitical risks,” it stated. (KUNA)