DUBAI/CAIRO: Kuwait issued a long-awaited law on Wednesday to regulate public borrowing as the country prepares for a return to international debt markets after eight years.
The new law sets the public debt ceiling at a maximum of 30 billion Kuwaiti dinars ($97.4 billion) and allows for the issuance of financial instruments with maturities of up to 50 years, the finance ministry said in a statement.
Kuwait last issued bonds in 2017. The passage of a debt law that would allow it to return to the debt markets and mitigate its heavy dependence on oil revenues has been hampered for years by infighting between successive parliaments and cabinets.
Kuwait’s Emir Sheikh Meshal al-Ahmad al-Sabah assumed power in December 2023 and dissolved parliament less than two months into his tenure, determined to push through economic reforms after the protracted deadlock.
The small Gulf nation has given its elected assembly the power to pass and block laws, question ministers and submit no-confidence motions, giving it more democratic essentials than other Gulf monarchies but posing the frequent risk of political impasse.
“This is an important sign of reform momentum building, alongside a vital fiscal development. For investors, it indicates that reforms are finally progressing,” Monica Malik, chief economist at Abu Dhabi Commercial Bank said.
The government has previously said government spending has to be fixed in order to control budget growth.
Kuwait’s budget is projected to show a deficit of 5.6 billion dinars ($18.33 billion) for the 2024-2025 fiscal year, with expenses estimated at 24.5 billion dinars.
“The new debt law will allow diversification of funding, reducing pressure on the General Reserve Fund,” Malik said.
“Moreover, the debt is also outlined to support the investment programme, which is showing tentative signs of building” and will be important for the banking sector and credit demand.“
Malik added that the next expected reform is the new mortgage law.
Kuwait, the Middle East’s fourth-largest oil producer, is the only Gulf Arab state to have dropped its peg to the US dollar, blaming rising inflation on the declining US currency through imports.
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