KUWAIT: Kuwait’s sovereign wealth fund has reached an initial agreement with Kuwait Petroleum Corporation (KPC) on new payment terms for over $20 billion in accrued dividends, a government source said, as the Gulf state seeks ways to counter a liquidity squeeze.

KPC has owed for years about 7 billion Kuwaiti dinars ($23 billion) in dividends to the General Reserve Fund (GRF), one of Kuwait’s sovereign funds.

GRF, which is used to cover state deficits, has been squeezed by the coronavirus-driven drop in oil prices and a continued stand-off between government and parliament on implementing measures such as a law to allow state borrowing.

The agreement between GRF and state-owned KPC on a new payment schedule has not been signed yet but the government source said it would be submitted to the finance and oil ministries for approval. He was confirming a report by Kuwaiti newspaper Al-Rai, which said KPC and the Kuwait Investment Authority - which manages Kuwait’s sovereign wealth funds - reached an initial agreement to transfer the dividends to the public treasury within a 15-year timetable.

The report said the accrued funds amounted to about 7.75 billion dinars. The source did not specify a time frame for the payment but said the final terms would not impact the financial position of the company or its ability to honour obligations linked to its investments.