Moody’s, the credit rating agency, confirmed that the State of Kuwait’s credit rating remains at (A1) with a stable outlook. This rating reflects the country’s solid budget and financial buffers, which are expected to remain strong in the foreseeable future.
However, Moody’s noted that the credit rating is constrained by the lack of progress in economic and financial reforms, which could reduce the impact of fluctuating oil markets, carbon emission reduction policies, and long-term energy transformation.
Substantial financial assets, low debt levels
Moody’s projected that Kuwait’s financial assets, particularly the assets of the Future Generations Fund (FGF), will remain high, reaching 400 percent of the gross domestic product (GDP) by the end of 2023, one of the highest levels globally. Furthermore, public debt is expected to remain below 3 percent of GDP by the end of the 2023-24 fiscal year, one of the lowest in the world.
Monetary policies, currency peg provide stability
The Central Bank of Kuwait’s monetary policies, which depend on a basket of currencies, and the Kuwaiti Dinar’s peg to this basket, are seen as a solid foundation for financial stability and protection against the impact of inflation.
Potential for rating upgrade with reforms
Moody’s stated that it could raise Kuwait’s credit rating if the country implements economic and financial reforms to reduce its dependence on oil revenues. This would increase the flexibility of the credit rating concerning oil price fluctuations. Diversifying the economy, particularly in areas like transport, logistics, petrochemicals, data centers, and renewable energy, could also contribute to a potential rating upgrade.
However, Moody’s cautioned that a delay in implementing financial and economic reforms could result in a downgrade of Kuwait’s credit rating.
For more news on the economy, click here.
