Kuwait clears KD 550 million in local sovereign bond payments

• Kuwait’s KD 2.44 billion international debt includes two issuances, with KD 1.07 billion paid in March 2022 and KD 1.37 billion due by March 2027.

• The value of existing sovereign bonds issued by the country in 2024 amounted to approximately KD 210 million, including KD 80 million in Shariah-compliant instruments.

Kuwait repaid local sovereign bonds totaling KD 160 million between May and August, originally issued by the Ministry of Finance between 2014 and 2017 in response to the country’s financial challenges, including a budget deficit caused by low oil prices. At that time, borrowing was deemed the most suitable approach to cover the deficit, given the availability of sufficient liquidity within the local banking system, low external borrowing costs, and Kuwait’s strong credit rating, according to responsible sources cited by Al-Anba newspaper.

The total amount paid by Kuwait for its local debt after accounting for the three benefits for the current year rose to KD 550 million, constituting 92% of the 600 million dinars in local bonds that have been in place since 2022.

Sources stated that the payment of KD 160 million constitutes 76% of Kuwait’s total local sovereign bonds outstanding since April 1, 2024, amounting to KD 210 million. The KD 160 million were due in three segments during the current year 2024, following the payment of the last 100 million dinars in August. This leaves KD 50 million of local sovereign bonds due in June 2027.

In detail, the value of existing sovereign bonds issued by Kuwait in 2024 amounted to approximately KD 210 million, including KD 80 million in Shariah-compliant instruments. Shariah-compliant local debt instruments constitute 38% of the total domestic sovereign debt, compared to KD 130 million in conventional sovereign bonds, which account for 62% of the local debt.

In 2024, Kuwait paid off three installments of bonds, starting with KD 10 million due on May 1. These bonds, issued on May 14, 2014, had a maturity of ten years and carried a fixed interest rate of 3.125%.

On May 1, 2024, Kuwait also paid approximately KD 50 million for seven-year debt instruments issued on May 10, 2017. This included KD 20 million in Islamic debt instruments and KD 30 million in conventional bonds, both of which had a variable interest rate of 2.5%.

On August 21, Kuwait paid KD 100 million, comprising KD 40 million in Islamic debt instruments and KD 60 million in conventional bonds. These were issued on August 30, 2017, with a seven-year maturity and a variable interest rate of 2.75%.

Kuwait has KD 50 million remaining in local sovereign debt instruments, including KD 20 million in Islamic debt instruments and KD 30 million in sovereign bonds issued on June 21, 2017, with a ten year maturity, due on June 9, 2027. These bonds carry a variable interest rate of 3%.

Kuwait began issuing sovereign bonds when the state’s general budget started experiencing deficits due to the collapse in oil prices ten years ago. As part of this strategy, Kuwait issued international bonds worth $8 billion. The first tranche, amounting to $3.5 billion, was issued for a 10-year period and has been fully repaid.

Of the $8 billion, the second tranche of international bonds, worth $4.5 billion (equivalent to KD 1.37 billion), remains outstanding and is due on March 20, 2027. This tranche was priced at 100 basis points above the yield on US Treasury bonds at the time of issuance.

It is noteworthy that the total domestic debt amounted to KD 600 million, with the last payment due on August 21, 2024. This debt was spread across nine issuances with maturities ranging from five to ten years, and payments began in 2022.

As for the international debt, which totaled KD 2.44 billion, it included two international issuances. The first, worth KD 1.07 billion, was paid on March 20, 2022, while the remaining KD 1.37 billion will be paid upon maturity on March 20, 2027.