Standard & Poor's Agency granted a sovereign credit rating to the state of Kuwait at (AA-) with a negative outlook, in light of the continued depletion of the public finance liquidator.

In its report, the agency expects the expansion of the general budget deficit of the State of Kuwait to about 30% of GDP in the fiscal year 2021/2020, compared to a deficit of approximately 10% of GDP in the year 2019/2020, while the main source of financing the general budget, which is the Reserve Fund, is approaching depletion.

According to the agency, after this immediate financial impasse, the momentum for broader reform is still slow and complicated due to the confrontational relationship between the National Assembly and the government; however, the total accumulated government savings for the State of Kuwait is still large, at more than 500% of GDP. Indicating that the negative outlook of the classification in the first place reflects the agency’s view of the risks in the short and medium term, arising from public financial pressures, represented by the expected reduction of the main source of government funding for the General Reserve Fund, while no alternative arrangements have yet been developed to finance the budget deficit. The rating also reflects medium-term risks due to slow progress in structural reform.

The agency revealed that there is a possibility to reduce the sovereign credit rating of the State of Kuwait during the next six to twelve months, if Kuwaiti institutions continue to prevent the government from finding a long-term sustainable solution to their financing needs.

Source (Al-Araby Al-Jadeed Newspaper, Edited)