Kuwait – Mubasher: Fitch Ratings said that new budget of Kuwait reflects smaller fiscal consolidation than in many highly rated regional peers, according to a recent issued statement.
This reflects the government's exceptionally strong fiscal position, yet the difficulty of pursuing structural reforms as well as the government's efforts to catch up with domestic infrastructure investment plan.
“The budget for fiscal year ending March 2017 (FY17), approved by parliament on 3 August, implies a budget deficit excluding oil income and financial investment flows of 69% of non-oil GDP, compared with 87% of non-oil GDP in FY15. This adjustment of around 18% of non-oil GDP over two years, half of which has been automatic as falling oil prices have lowered subsidy expenditure,” Fitch said.
The country’s sovereign net foreign assets are the largest of any Fitch-rated sovereign and debt/GDP is among the lowest.
“The Reserve Fund for Future Generations (RFFG) has estimated assets of more than 300% of GDP. Fitch forecasts the value of the General Reserve Fund (GRF) to fall to 98% of GDP in FY17 from 103% in FY16. These estimates are based on public, non-official sources,” it added.
Fitch expected that budgeted issuance of KWD 5 billion ($16.6 billion) will raise Kuwait's debt ratio to 24% of GDP at end-2016 from 9% of GDP at end-2015.
“Subsidy reform in Kuwait has lagged behind other highly rated GCC countries, with reforms like the fuel price rises approved on 1 August by Kuwait's cabinet already enacted in the UAE, Saudi Arabia, and Qatar. This highlights the difficulties the government faces in building political consensus on reform,” it noted.
Fitch expects Kuwait’s capital spending to be close to budgeted amounts in FY17, after 89% execution in FY16, 81% in FY15, and 68% in FY14. The rise reflects a more stable political environment that should allow the government to pursue its KWD 34 billion (90% of GDP) 2015-2020 development plan.
