S&P Global revises its Kuwait outlook to stable from negative

S&P Global revises its Kuwait outlook to stable from negative

KUWAIT: S&P Global Ratings revised its outlook on Kuwait to stable from negative and affirmed the ‘A+/A-1’ long- and short-term foreign- and local-currency sovereign credit ratings. The transfer and convertibility assessment remains at ‘AA-‘.

The stable outlook primarily reflects the favorable oil price and domestic production prospects over the next two years. It is also based on our expectations that Kuwait will implement additional fiscal financing mechanisms on top of withdrawals from the government’s main treasury buffer, the General Reserve Fund (GRF). This could, for example, include unblocking longstanding constraints on borrowing, by introducing a new debt law, which would allow a wider range of financing options when fiscal deficits re-emerge at a future time.

Downside scenario

We could lower the rating if no sustainable comprehensive financing arrangements are agreed over the next two to three years. This could happen, for instance, because of ongoing tensions between the government and parliament rendering the government unable to implement fiscal reforms, pass the debt law, or authorize other necessary budget-financing mechanisms.

We could also lower the rating if we concluded that the government would not have full ready access to the Future Generations Fund (main portion of Kuwait’s sovereign wealth fund; FGF) for budgetary and debt