Kuwait  - S&P Global Ratings on Friday placed Kuwait’s currency sovereign credit ratings at A+, raising the Gulf country’s future outlook from “negative” to “stable.” In its report, the ratings agency expected the major oil exporter to benefit from favorable oil prices and production until the end of next year. It also forecasted a 2022-23 cumulative general government surplus of 18 per cent of GDP based on an USD 75-80 oil price, saying this would allow authorities to “replenish liquidity in the previously depleted main treasury buffer.”

The report expected Kuwaiti authorities over the next two years to adopt measures to diversify its income sources, “so that the previous fiscal funding impasse with the depletion of liquidity at the GRF (General Reserve Fund) does not recur, even if oil prices fall below current levels.” The agency said it “could lower” Kuwait’s rating if no sustainable comprehensive financing arrangements are made over the next 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,” it warned.

This rating may be raised, it also said, “if the government successfully implemented a comprehensive structural reform package aimed at improving fiscal financing mechanisms, diversifying the economy and reducing the non-oil deficit.” Kuwait has “limited government financing needs” until 2025 after its repayment of a USD 3.5 billion Eurobond in March, it added, revealing that the general government debt now stands at just 3.5 per cent of GDP.

The Gulf country’s heavy dependence on oil sees this sector occupy an estimated 90 per cent of exports and government revenue, constituting nearly 50 per cent of the GDP average, according to the report.

“Kuwait is set to notably benefit from the currently favorable terms of its (oil) trade,” it highlighted, forecasting oil prices to drop between 2002 and 2024 from USD 102 per barrel, to USD 85 per barrel and USD 55 per barrel year-on-year respectively.

It said Kuwait’s oil production has risen in line with the phase out of OPEC+ production cuts, averaging 2.4 million barrels per day in 2021, which it expects will rise to 2.75 million barrels per day and 3 million barrels per day over the next two years respectively. This will keep the OPEC member country in compliance with OPEC+ agreements, it mentioned.

Economic growth will hit 8 per cent this year and 5.5 per cent in 2023 followed by “more modest growth rates” of around 2 per cent in the 2024-2025 period, it suggested. The agency also estimated Kuwait’s net general government assets to reach 370 per cent of GDP by the end of the year. Furthermore, Kuwait’s fiscal position was described as a “key ratings strength,” as Kuwait Investment Authority’s (KIA) total assets, worth 470 per cent of GDP at the end of 2021, remain “substantial.” 

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