Kuwait has ample assets to cover medium-term spending plans despite continuing low oil prices, Fitch Ratings has said.
The ratings agency, which has affirmed Kuwait's long-term foreign and local currency issuer default ratings at 'AA' with a stable outlook, said the country has one of the lowest fiscal break-even Brent oil prices among Fitch-rated oil exporters at $48 per barrel.
"Forecast fiscal and external surpluses will continue to add to the country's existing buffers, if at a lower rate than historically," said Fitch in a statement.
It added: "These strengths are tempered by Kuwait's heavily oil-dependent economy, a degree of geopolitical risk, and weak scores on measures of governance and ease of doing business."
Fitch said Kuwait has ample assets to cover medium-term spending needs, estimating that total assets managed by the Kuwait Investment Authority (KIA) will reach $472 billion (377 percent of GDP) for the full year 2015/16.
It said that the figure is likely to continue to rise due to investment returns and on-going transfers of revenue, adding that at 8.3 percent of GDP in 2015, debt will be one of the lowest for Fitch-rated sovereigns.
"We expect the general government to maintain a surplus of KD1.8 billion (4.9 percent of GDP) in 2015, down from KD8 billion in 2014," the statement said.
Kuwait's government is considering fiscal reforms for implementation in the 2016 budget including the introduction of VAT and a business profit tax, and a reform that would standardise pay across the public sector and constrain growth of the government wage bill.
Authorities are also considering a gasoline subsidy reform for implementation in early 2016, following partial elimination of diesel and kerosene subsidies in early 2015.
Fitch said that it estimates that real GDP will grow by 0.8 percent in 2015, after a 1.6 percent drop in 2014, accelerating to 3.5-4 percent over the following two years.
Source: Arabian Business