The Kuwaiti Cabinet approved a draft decree paving the way for the OPEC member state to issue international debt for the first time in eight years. A law related to “financing and liquidity” was enacted, referring to the public debt law.
The original draft law set a borrowing ceiling of 20 billion Kuwaiti Dinars (65 billion USD) over 50 years. However, the final version may increase the debt ceiling, with previous proposals suggesting raising it to 30 billion Kuwaiti Dinars.
Political disputes had delayed the passage of the public debt law for years, making it impossible for successive governments to borrow, forcing them to rely on the General Reserve Fund or the state’s treasury. Kuwait is expected to primarily turn to international markets to finance major development projects and address fiscal deficits when needed.
Kuwait is one of the world’s largest oil exporters and has a sovereign wealth fund estimated at around one trillion USD. Its last debt issuance was in March 2017, when it issued bonds worth 8 billion USD with five- and ten-year terms, days before the expiration of the previous public debt law.
Kuwait’s longest-term bonds, due in 2027, are trading at a yield of around 4.75%, roughly in line with bonds from oil-rich governments like Abu Dhabi, Qatar, and Saudi Arabia, and about 200 basis points below the average yields of emerging market sovereign debt.
Kuwait has low levels of external debt and holds an “A1” credit rating from Standard & Poor’s, equivalent to the ratings of China and Japan. The decision to dissolve the National Assembly and suspend its operations for four years has granted the government the authority to pass key legislation. With the new law enacted, Kuwait will be able to issue both conventional bonds and Islamic sukuk.
