Kuwaiti banks to fully support sovereign debt issuance amid strong liquidity and solvency

Local banks in Kuwait are well-positioned to fully support the upcoming sovereign debt issuance, thanks to their strong financial solvency, high liquidity, and access to diverse local and international funding sources.

According to banking sources, they emphasized that the anticipated issuance will not negatively impact the financing of major development projects, economic activity, or market participation, reports Al-Jarida daily.

According to the sources, substantial liquidity levels in the local market currently necessitate active intervention from the Central Bank of Kuwait (CBK) to manage surplus cash, making bond issuance and securitization a strategic financial tool. They revealed that local banks will play an active role in the upcoming sovereign offering, helping to reduce associated costs and financing burdens.

Key liquidity indicators shared by the sources include 4.92 billion dinars in accounts and demand deposits with the CBK; 750.2 million dinars in time deposits and tawarruq arrangements and 1.345 billion dinars in Central Bank bonds and corresponding tawarruq.

The sources affirmed that any sovereign issuance—regardless of size—will be fully covered by local banks, citing recent CBK offerings that have been oversubscribed by two to three times.

The upcoming issuance is expected to rank among the highest-rated sovereign offerings, given Kuwait’s low overall public debt, robust cash flows and foreign reserves and strong sovereign investments, including one of the world’s most powerful sovereign wealth funds.

Sources added that current bank claims on the government stand at approximately 337.3 million dinars ($1.1 billion), a modest figure that reflects Kuwait’s healthy fiscal position.

The sovereign issuance is anticipated to deliver mutual benefits such as providing banks with secure and favorable investment opportunities; helping manage excess liquidity in the banking sector and channeling additional resources to support future infrastructure and development projects.

This move signals the government’s confidence in leveraging the financial system to meet economic and development goals, while maintaining fiscal discipline and monetary stability.