Kuwait May Be Able to Sell First Debt Since 2017 After New Law
Kuwait may soon embark on its first debt issuance in eight years. The Council of Ministers is on the verge of approving a new law that could pave the way for raising 20 billion dinars ($65 billion) over the next five decades.
The decree would empower Kuwait, a member of the Organization of the Petroleum Exporting Countries (OPEC), to issue both conventional bonds and Islamic Sukuk. This move is a necessary step for accessing international financial markets.
There is discussion around possibly raising the debt cap in the final draft of the law, as earlier proposals indicated a limit might be set at 30 billion dinars.
Kuwait plans to access bond markets on an as-needed basis, making this a strategic financial step to support essential state activities. Kuwait’s last entry into international debt markets was in March 2017, with an $8 billion issuance just before the previous debt law expired. This remains Kuwait’s sole outstanding Eurobond, and it currently yields about 4.9%, which is notably low for emerging-market sovereigns.
The Ministry of Finance has not yet provided any comments regarding this impending development.
For several years, the absence of a public debt bill due to political deadlock within the parliament has impeded successive Kuwaiti governments from borrowing. This has forced the nation to heavily rely on the General Reserve Fund, more commonly referred to as the treasury. By tapping into international markets, Kuwait aims to mainly fund crucial development projects and address any fiscal deficits that may arise.
In an effort to advance the nation’s economic framework, Kuwait’s ruler, Sheikh Mishaal Al-Ahmed Al-Sabah, took significant action by suspending parliament for four years in May. This decision effectively cleared the path for the unelected government to pass pivotal bills that have been delayed for years due to internal disputes. Such squabbles have historically occurred between ministers appointed by the ruling Al-Sabah family and the publicly elected lawmakers.
Sheikh Mishaal emphasized the necessity of this decision, warning of the potential “collapse” the Gulf state could face due to its dysfunctional politics. This environment has caused a repetitive turnover of governments and has hindered reforms crucial for the oil-reliant economy.
Traditionally perceived as the slowest among Gulf Arab economies to reform, Kuwait trails its neighbors in actions such as reducing subsidies — which combined with state-sector salaries, constitute over 80% of government spending — and in implementing taxes. As part of its reform efforts, the finance ministry recently announced the imposition of a new tax aimed at multinational corporations, effective from January 1st. According to this announcement, these corporations are required to pay a minimum rate of 15% on their profits as part of the country’s strategy to enhance its fiscal framework.
