Fitch Ratings has reaffirmed Kuwait’s foreign and local currency sovereign credit ratings at AA- with a stable outlook. This rating reflects a minimal risk of default and demonstrates Kuwait’s strong ability to meet its financial obligations. Fitch considers Kuwait’s fiscal and external balance sheets to be among the strongest of all Fitch-rated sovereigns.
Read more: Fitch expects strong growth for MENA oil-exporting countries in 2024
However, Fitch acknowledges that Kuwait’s heavy reliance on oil poses some limitations. The country’s rating is constrained by factors such as its dependence on oil, the sustainability of its generous welfare system and large public sector in the long term, and a political environment that hampers efforts to address fiscal and economic challenges and approve legislation related to debt issuance and government financing sources.
Sovereign net foreign assets
Fitch also projects that Kuwait’s sovereign net foreign asset position will average 529 percent of gross domestic product in 2024-25. The report highlights the recurring conflicts between the elected parliament and the 15-member cabinet in Kuwaiti politics, which often lead to minister resignations and parliament dissolutions. The most recent dissolution occurred in February, and new elections are scheduled for April 4.
Following the elections, the government aims to pass a liquidity law, although parliamentary approval remains uncertain. Fitch’s forecasts, including government debt projections, assume that a liquidity law will be passed by the fiscal year ending in March 2026. Fitch believes that even without a liquidity law, Kuwait’s government would still be able to meet its limited debt service obligations in the coming years due to the assets at its disposal.
Oil price outlook
Fitch expects the average oil price for Kuwait to be $79.8 per barrel in the financial year 2024, representing a 5 percent decrease compared to 2023. For the financial year 2025, Fitch assumes that Kuwait’s average oil price will decline to $71 per barrel, while crude output is expected to rise to 2.66 million barrels per day, assuming some relaxation of production constraints by OPEC+ (Organization of the Petroleum Exporting Countries and its allies).
Furthermore, Kuwait’s gross government debt remains low, estimated at 3.1 percent of GDP in the financial year 2023, but it is projected to increase to 11 percent of GDP by 2025.
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