KUWAIT CITY, Nov 22: Standard & Poor’s (S&P) Global Ratings raised Kuwait’s sovereign credit rating from A+ to AA- on Friday while maintaining a stable outlook, citing progress in public finance reforms, the Central Bank of Kuwait announced.

In a statement to Kuwait News Agency (KUNA), the Central Bank explained that S&P’s report highlighted the Finance and Liquidity Law, passed in March 2025, as paving the way for comprehensive medium- and long-term budget financing arrangements. The report also anticipates that the government will continue working on a medium-term financing plan that supports the expansion of non-oil revenue sources.

S&P expects Kuwait to continue implementing a package of fiscal and economic reforms within the framework of its 2035 vision. These reforms focus on economic diversification, infrastructure modernization, and diversifying public revenue sources to enhance fiscal sustainability.

The statement added that the stable outlook reflects S&P’s assessment that Kuwait’s fiscal and external balances will remain very strong over the medium term, supported by substantial government financial assets. The agency noted that these assets and ongoing reform momentum will mitigate economic risks associated with heavy reliance on the oil sector, potential oil price volatility, and high levels of fiscal spending.

Regarding economic developments, the statement indicated that the Kuwaiti economy recorded annual growth of 1.3 percent in the first half of 2025, noting that fiscal reforms, increased oil production, and large-scale capital projects will drive economic growth. The agency anticipates that Kuwait’s economic growth will accelerate to an average of 2 percent during 2025-2028, following two consecutive years of contraction.

The statement added that S&P highlighted fiscal reforms and expects that rapid reforms will contribute to fiscal consolidation in the medium and long term. These reforms include increasing non-oil government revenues and controlling government spending. It added that in 2025, the government began implementing the Finance and Liquidity Law and adopted a minimum 15 percent additional tax on multinational corporations.

Regarding public spending, S&P indicated that more efficient workforce planning and several other fiscal reforms will be implemented. It also noted that the issuance of the Sukuk Law would enhance the diversification of the government’s debt structure.

According to the statement, the agency pointed to government investments, explaining that large-scale capital investments would support growth, including the development of the northern economic zone, along with several energy projects. It anticipated that the hospitality sector would benefit from the expansion of Kuwait International Airport, expected to be completed in 2027, in addition to visa reforms, which include granting visas on arrival to all residents of GCC countries, an electronic visa system, and the elimination of minimum salary requirements for family visas.

The agency explained that, with regard to developments in the general budget, low oil prices and high levels of public spending will lead to a budget deficit in the medium term, while current account surpluses and a strong net foreign asset position remain credit strengths. The agency expects the Kuwaiti dinar to remain pegged to an undisclosed weighted basket of currencies, noting that this monetary system has historically helped Kuwait manage inflation. It also anticipates that the annual inflation rate will remain moderate at around 2.4 percent during 2025-2028, lower than levels seen in many emerging market and advanced economies.

The Central Bank statement indicated that the agency’s report addressed developments in the banking and financial sector, noting that it does not expect any significant contingent liabilities to the government arising from the Kuwaiti banking sector. It anticipates that the loan portfolio growth of the eight largest banks will range between 8 and 10 percent during 2025-2026, supported by a relative improvement in the economic environment and low interest rates. The agency noted that credit losses and non-performing loans in the banking sector have reached their lowest levels, and ample provisions have contributed to strengthening banks’ ability to manage non-performing loans during economic cycles.