Mubasher: Fitch Ratings has affirmed Kuwait's long-term foreign-currency issuer default rating (IDR) at 'AA' with a stable outlook, according to a report issued on Wednesday.
The ratings agency noted that Kuwait's key credit strengths are its exceptionally strong fiscal and external metrics
However, these strengths are tempered by Kuwait's heavily oil- dependent economy, geopolitical risk, and weak governance and business environment.
A generous welfare state and the large economic role of the public sector present increasing challenges to public finances, given robust growth of the Kuwaiti population, the report noted.
The report is forecasting modest surpluses of around KWD 300 million, equivalent to around 0.7% of the total gross domestic product (GDP), in fiscal years 2018/2019 and 2019/2020, under a price assumption of $57.5 per barrel for Brent crude oil.
“We assume that the debt law will eventually get passed, paving the way to more debt issuance in FY18/19 and FY19/20. Under our forecasts, the government issues just under $16 billion in foreign debt in the coming two years, and the debt/GDP ratio rises to around 38% by 2019,” the report added.
Fitch also expects broad policy continuity after the government reshuffle of late 2017, and that non-oil sectors register a growth rate of 3.5% in 2018-2019 amid continued growth of government spending on wages and investment.
