Kuwait’s Cabinet has approved a public debt law that allows debt issuance for the first time since 2015. This decision, crucial for financing development projects and addressing fiscal deficits, awaits Emir approval. The law could enable raising up to 20 billion dinars. It represents a strategic move to enhance economic capabilities amid historical political dysfunction.
Kuwait’s Council of Ministers has approved a draft decree that enables the nation to sell debt for the first time since 2015. The cabinet’s decision, pertaining to a public debt law named “financing and liquidity,” was made public following a recent meeting; however, specifics were not disclosed. The proposal, introduced by Finance Minister Noura Al-Fassam, now awaits the endorsement of Emir Sheikh Mishaal Al-Ahmed Al-Sabah, who must authorize all legislative measures.
The initial draft outlines a capacity to raise up to 20 billion Kuwaiti dinars (approximately $65 billion) over a span of 50 years. This ceiling might be adjusted in the final legislation, with prior suggestions indicating a potential limit of 30 billion dinars. Academic Bader Al Saif remarked, “Better late than never,” and cautioned that without timely action, Kuwait’s significant potential could fade away.
For years, Kuwait’s absence of a public debt bill, hindered by political disputes, has restricted the government from acquiring necessary funds, compelling reliance on its General Reserve Fund. The nation is expected to utilize international markets primarily to finance critical development projects and address fiscal deficits if required. As a principal US ally in the Middle East, Kuwait is one of the largest oil exporters and possesses a sovereign wealth fund estimated at around $1 trillion. The last debt issuance occurred in March 2017, amounting to $8 billion.
In May, the ruler of Kuwait suspended parliament for four years, facilitating the ruling Al-Sabah family’s government to pass essential legislation. Political dysfunction has historically hindered development, deterring foreign investment and delaying fiscal reforms, thus obstructing diversification from oil dependency. Upon its enactment, the new law will empower Kuwait to issue both conventional bonds and Islamic Sukuk, although it intends to access bond markets selectively. Al-Saif commented on the government’s swift decision-making and assertive communication of its policies to convey that “Kuwait is back.”
The approval of the debt law by Kuwait’s Cabinet marks a significant turning point for the nation after years of political delays. This law, pending Emir approval, could facilitate substantial long-term borrowing aimed at financing vital development projects and addressing fiscal needs. The situation reflects Kuwait’s potential for economic revival if it navigates its political challenges effectively.
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