DUBAI - Kuwait plans to establish a law to regulate issuance of sukuk, or Islamic bonds, locally and internationally in support of more sustainable finances for the oil-rich Gulf country, the prime minister said on Wednesday.

Sheikh Ahmad Abdullah Al-Ahmad Al-Sabah told the World Governments Summit in Dubai that his country was seeking various debt tools to diversify its economy.

Kuwait has been pushing fiscal reforms to drive growth and control its budget deficit against a backdrop of low oil prices. Hydrocarbons are the small country's main source of revenue, accounting for almost 90% of government revenue in 2024.

"We are about to approve the first legislation regulating issuance of government sukuk locally and internationally, in accordance with Islamic laws," al-Sabah said.

"This enables us to deal with financial challenges flexibly and responsibly, and to plan for medium and long-term finances."

Kuwait returned to global debt markets last year with a strong performance that drew hefty investor demand and raised $11.25 billion from a three-part bond sale in its first U.S. dollar issue since 2017.

A new public debt law in March increased the borrowing ceiling to 30 billion dinars ($98 billion) from 10 billion dinars previously, thereby allowing longer borrowing terms.

(Reporting by Nayera Abdallah and Jana Choukeir; Editing by Hugh Lawson and David Goodman)