KUWAIT CITY, April 9: The Standard & Poor’s Global Ratings agency has affirmed its long- and short-term foreign and local currency sovereign credit ratings on Kuwait at ‘A+/A-1’ with negative outlook. “The negative outlook primarily reflects risks over the next 12-24 months relating to the government’s ability to overcome the institutional roadblocks preventing it from implementing a future financing strategy,” the New York-based agency clarified in a press release on Thursday.

The leading rating agency, however, stated that it could revise Kuwait’s outlook to stable if the government successfully addresses the country’s existing fiscal funding constraints, for example through a combination of debt law adoption, authorization to withdraw specified amounts from the Future Generations Fund (FGF) when required, and a fiscal consolidation program. The international agency also cautioned that it could lower the ratings if no sustainable comprehensive financing arrangements are agreed. “This could happen, for instance, because of ongoing confrontations between the government and parliament, rendering the government unable to implement fiscal reforms, pass the debt law, or authorize other budget financing mechanisms if needed,” it indicated. “We could also lower the ratings if we concluded that the government will not have full ready access to the FGF for budgetary and debt repayment needs, contrary to our current assumption.”

The S&P forecasted that higher oil prices would bolster Kuwait’s fiscal and balance of payments positions over 2022-2023. “Nevertheless, beyond this shortterm support, Kuwait’s medium-term funding strategy remains uncertain. The General Reserve Fund (GRF) has dwindled and the new debt law has still not been adopted, “Other financing arrangements — such as an authorization for the government to readily directly access the large Future Generations Fund (FGF) up to a certain amount — are not yet in place,” it pointed out. The agency also expressed concerns that rising tensions between the government and the parliament could reduce the likelihood that these reforms would be implemented in the near future. It projected that Kuwait’s general government debt will be just 4 percent of GDP by the end of 2022 and its total fiscal assets at around 400 percent of GDP. “Despite the prolonged standoff between the executive and legislative branches and the reported late payments to suppliers, we still assume the government will overcome institutional constraints and have a mechanism to access the FGF if other options are not available,” it added. , (KUNA)