This report does not constitute a rating action.
LONDON (S&P Global Ratings) May 14, 2024--In our view, while Kuwait's dissolution of its parliament and suspension of parts of its constitution (for no longer than four years) could affect Kuwait’s long-standing institutional checks and balances, the measures are also likely to speed the passage and implementation of much-needed structural reforms, including raising government fiscal revenue, cutting government expenditure, and improving Kuwait's budget-financing options.
On May 10, after four elections in four years, Kuwait's Emir, H.H. Sheikh Mishal Al-Ahmad Al-Jaber Al-Sabah, dissolved the country's National Assembly and suspended parts of the constitution for a maximum of four years. During this time, the government says it will undertake a constitutional review and likely reform the current constitutional framework.
Under Kuwait's long-standing political system, the general population vote for members of the elected National Assembly, while the Emir appoints the prime minister, who then selects the cabinet (in consultation with the Emir).
The relationship between members of the National Assembly and the Emiri-appointed cabinet has been difficult for several years. Cabinet-sponsored reforms have repeatedly failed to pass after being unable to gain sufficient support in the National Assembly. Not only has this slowed reform momentum, it has also constrained the government's funding sources and limited its ability to raise debt. S&P Global Ratings has previously cited Kuwait's lack of reform momentum as a constraint on the ratings, while noting that the country's elected parliament provided a check on the cabinet and made Kuwait unique when compared with peers within the Gulf region.
Kuwait’s oil production capacity stands at about 3 million barrels of oil per day, and in line with current OPEC + quotas it is currently producing around 2.4 million barrels of oil per day. Significant oil production has, over decades, permitted the country's sovereign wealth fund to amass significant assets that the sovereign wealth fund institute estimates amount to $937 billion. Our ratings are supported by Kuwait's large oil production and the current, relatively favorable, oil price dynamics. They are constrained by the lack of reform momentum and lack of fiscal financing avenues.
Related Research
- Kuwait, Dec. 11, 2023
- Kuwait Outlook Revised To Stable From Negative On Favorable Terms Of Trade; 'A+' Ratings Affirmed, July 15, 2022
- Kuwait Ratings Lowered To 'A+' On Lack Of Comprehensive Funding Strategy; Outlook Remains Negative, July 16, 2021
| Primary Contact: | Ravi Bhatia, London 44-20-7176-7113; ravi.bhatia@spglobal.com |
| Secondary Contact: | Benjamin J Young, Dubai 971-4-372-7191; benjamin.young@spglobal.com |
| Analytical Group Contact: | EMEA Sovereign and IPF, ; SovereignIPF@spglobal.com |
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