Moody's, the credit rating agency, revealed that in the absence of high oil prices and the absence of major measures in the fiscal adjustment process, it is expected that Kuwait will need to liberate the assets of the Future Generations Fund or investment income, in order to support the budget and to find a solution to the financing problem the country is currently facing.
The agency indicated that Kuwait faces a number of options in the event that the public debt law is not passed, indicating that the first option is to request the General Investment Authority to allow borrowing from the Future Generations Fund and transfer those loans to the General Reserve Fund, which is a fund that can be used without issuing any former decree to use it. The agency indicated that if the public debt law is passed, this will only be a short-term reform, and it will not be able to remove the uncertainty surrounding Kuwait's financial situation in the medium term, but that would alleviate the current shortage of government liquidity for a period of time.
"Moody's" downgraded Kuwait by two degrees from Aa2 to A1, with the change of the outlook from negative to stable. The agency indicated that this decision reflects an increase in government liquidity risks, and a weaker assessment of institutional strength and governance standards, revealing the escalation of liquidity risks, despite the exceptional financial strength of Kuwait, driven by a set of factors linked to the continued absence of a new public debt law, the government not allowing withdrawals from the Future Generations Reserve Fund while the liquid resources available in the General Reserve Fund are nearing to be depleted.
Source (Al-Rai Newspaper-Kuwait, Edited)
