"Fitch" confirms Kuwait's rating at AA with a stable outlook

Fitch Rating Agency has confirmed the sovereign credit rating of Kuwait for the year 2020 at the AA rank with a stable outlook.

According to ArabiaNet, the agency said in its report on Kuwait’s rating that the exceptionally strong financial and external conditions for Kuwait represent the strengths of its sovereign credit rating, increasingly matched by institutional deficits and slowness in addressing the challenges of financing the public budget arising from heavy dependence on oil.

The agency estimated net foreign sovereign assets managed by the General Investment Authority at about 529 billion dollars, representing 472% of GDP, the highest among the countries ranked by the agency.

She explained that this value includes the net assets of the Future Generations Reserve Fund, estimated at $ 489 billion, and the value of this fund is constantly increasing as a result of continuous annual transfers of about 10% of the total public revenue of the state.

Fitch expects the value of the General Reserve Fund to decrease for the sixth consecutive year due to the government's resort to the fund to finance the public budget deficit and pay the local debts due. And it expected the public budget to record a fiscal deficit of about 20% of GDP, about 3.7 billion Kuwaiti dinars (about 9.21 billion dollars) in the current fiscal year, reflecting the basic assumptions of the agency that Brent crude would reach about 35 and 45 dollars per barrel in 2020 and 2021, respectively. .

She stated that it is not expected that there will be a major response to the financial policy in exchange for the shock of oil prices and the continuation of the Corona virus pandemic and the National Assembly elections in next October, at a time when she expected that the foreign assets of the General Reserve Fund would be almost exhausted in the fiscal year 2020-2021, assuming that the government would resume borrowing and drawing From the Future Generations Fund to finance the public budget deficit from the fiscal year 2021-2022.

She indicated that the Future Generations Reserve Fund will allow Kuwait to finance the current levels of the budget deficit for decades to come, but it requires the approval of the National Assembly, pointing out that the government is currently pushing again towards passing the new public debt law and is not considering changing the arrangements that govern the future generations fund.

Fitch considered that it might be possible to take other exceptional measures to ensure debt service in a timely manner, pointing out that the government has made minimal progress in its reform program aimed at strengthening its basic financial position, improving the business environment and enhancing the role of the private sector in providing job opportunities for youth.

She expected real GDP to witness positive growth for 2020, coinciding with the increase in oil production and the start-up of refining facilities that were developed, although it is likely that the non-oil sectors will witness a recession as a result of the spread of the Corona virus this year. She said that the banking sector has the capacity to absorb bad loan losses thanks to high rates ...