This message has been read 314 times!
KUWAIT CITY, July 16: S&P Global Ratings upgraded Kuwait’s sovereign credit rating to A+ on Friday, raising the Gulf country’s outlook from “negative” to “stable”. In its report, the rating agency expects the major oil exporter to benefit from favorable oil prices and production until the end of next year. He also projected a cumulative general government surplus of 18% of GDP in 2022-23 based on an oil price of US$75-80, saying this would allow the authorities to “rebuild liquidity in the main buffer of the Previously depleted treasury”.
The report expects the Kuwaiti authorities to adopt measures over the next two years to diversify their sources of revenue, “so that the previous fiscal stalemate with the depletion of liquidity in the GRF (General Reserve Fund) does not not happen again, even if oil prices fall below current levels.The agency said it “may downgrade” Kuwait’s rating if no sustainable package deal is reached within the next three years. “This could happen, for example, due to the continued tensions between the government and the parliament, rendering the government unable to implement tax reforms, pass the debt law or allow other mechanisms of necessary budgetary funding”, he warned.
This rating could be upgraded, he also said, “if the government successfully implements a comprehensive set of structural reforms aimed at improving fiscal financing mechanisms, diversifying the economy and reducing the non-oil deficit. “. Kuwait has ‘limited public financing needs’ until 2025 after the repayment of a $3.5 billion Eurobond in March, he added, revealing that public debt is now rising only 3.5% of GDP.
The Gulf country’s heavy dependence on oil means that this sector accounts for around 90% of exports and government revenue, constituting almost 50% of average GDP, according to the report. “Kuwait in particular stands to benefit from the currently favorable conditions of its (oil) trade,” he pointed out, predicting a drop in oil prices between 2002 and 2024, from 102 USD per barrel to 85 USD per barrel and 55 USD per barrel per year. over one year respectively. He said Kuwait’s oil production had increased in line with the phasing out of OPEC+ production cuts, averaging 2.4 million barrels per day in 2021, and is expected to reach 2.75 million barrels. per day and 3 million barrels per day over the next two years respectively. . This will keep the OPEC member country in line with OPEC+ agreements, he said.
Economic growth will reach 8% this year and 5.5% in 2023, followed by “more modest growth rates” of around 2% over the period 2024-2025, he suggested. The agency also estimated that Kuwait’s general government net assets would reach 370% of GDP by the end of the year. In addition, Kuwait’s fiscal situation has been described as a “key rating force”, as the total assets of the Kuwait Investment Authority (KIA), worth 470% of GDP at the end of 2021, remain “substantial”. (KUNA)