Moody’s retains Kuwait’s rating at A1

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KUWAIT CITY, Nov 12: Moody’s rating system has kept Kuwait’s rating at ‘A1’ with a stable outlook, due to its long track record of effective and credible financial and monetary policies, strong management of accumulated assets, strong financial rules and discipline in the balance sheet for decades, and effectiveness of fiscal policy, which has been marked by a slow response to the oil price shock since 2015, reports Al-Qabas daily.

In its report regarding an analysis of the credit situation in Kuwait, “Moody’s” indicated that public debt decreased to 10.2 percent of the GDP in the 2019/2020 fiscal year, compared to 20.5 percent in 2017/2018 fiscal year.

The report assumed that government funding requirements until the end of the current fiscal year would be financed by the issuance of new debts, in the event that the future generations fund law was not amended.

It stressed that the large financing needs coincided with the continued decline in oil revenues, and it is unlikely that the non-oil revenues would increase due to the slow progress of procedures in this area.

Moody’s estimated the total financial needs of Kuwait at about 29.2 percent of the GDP in the 2020/2021 fiscal year. This increase is mainly due to the large fiscal deficit in the budget.

Moody’s said, “The maturity profile of Kuwait’s bonds is relatively modest, as there are Eurobonds maturing in 2022 and 2027. However, given our expectations that the liquid assets of the public reserve fund will be exhausted by December 2020, the government will need to refinance any payable bonds, which requires the issuance of the public debt law”.

The agency renewed its expectation that the public debt law will be issued by a decree of necessity during the National Assembly recess, expecting the liquid assets of the public reserve fund to run out before the first session of the new parliament.

It said, “Even if the government was able to pass the public debt law, it would not solve the problem of lack of clarity about the sources of government funding in the medium term. The debt ceiling in the proposed law submitted by the government to the National Assembly was at KD 20 billion, and this ceiling can be reached in less than two years, according to basic scenarios.

Also, if the government obtains the approval of the National Assembly without restricting the maximum limit, we expect to issue a net debt that may reach $ 27.6 billion between the current fiscal year and March 2024. This is a test of the government’s ability to issue such large debts in the domestic and international capital markets”.

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