CAIRO (Middle East) – Kuwait’s finance minister on Tuesday called for reforms in the Gulf oil producer’s public finances, which have been hit by a plunge in crude prices, but said its financial position was solid.
The rating agency Fitch on Tuesday affirmed its AA rating for Kuwait’s sovereign debt, citing strong fiscal and external balance sheets.
But the government is finding resistance in parliament to a proposed debt law it needs in order to be able to borrow more and have additional tools at its disposal to finance the budget deficit.
“Affirming Kuwait’s sovereign rating reflects the country’s credit strength and the solidity of its financial position, which is fully supported by the size of assets in the Reserve Fund for Future Generations,” Finance Minister Barak Ali Al-Shitan was quoted as saying in a ministry tweet.
“But as other rating agencies are reviewing Kuwait’s rating, including Moody’s, there is a need to complete reforms of the public finances and boost the liquidity of the General Reserve Fund … especially with the sharp drop in oil prices.”
Kuwait’s sovereign wealth fund stands at about 500% of GDP, but the portion used to cover deficits – the General Reserve Fund – is estimated at only around 50% of GDP, according to S&P Global Ratings.
Should Kuwait not pass the debt law, it is unclear whether it could face budget constraints or start drawing on the Future Generations Fund, which has happened only once before, during the Gulf War, S&P said.
Moody’s last week put Kuwait’s rating on review for a potential downgrade, citing a decline in government revenues due to lower oil prices.
(Photos syndicated via Reuters)