According to Fitch Ratings, Kuwait ranked as the third-largest issuer of dollar-denominated bonds in the Gulf in 2024. This achievement comes despite the country’s lack of a debt law that would allow the government to engage in sovereign borrowing.
Fitch Ratings stated in its report that the Kuwaiti government is working towards passing a debt law, which would allow it to generate new revenue streams and potentially support the growth of financial markets for Kuwaiti issuers.
Moreover, Fitch Ratings anticipates that Kuwait will pass the debt law by the fiscal year ending March 2026, though delays remain a possibility. The agency highlighted that despite Kuwait itself not issuing any dollar bonds since 2017, debt issuances by Kuwaiti issuers surged to $13.6 billion in 2024, surpassing the $11.8 billion issued across the entire bond and sukuk sector between 2018, and 2023.
The share of sukuk in Kuwait’s total capital issuances increased to 27% by the end of January 2025, up from 20% a year earlier. Additionally, none of the rated sukuk or bonds defaulted in 2024. By the end of the year, more than $3 billion worth of Kuwaiti sukuk had been rated, with all issuers being financial institutions maintaining stable outlooks.
Resume Borrowing
Fitch stated that the Kuwaiti government is in discussions over a draft liquidity law, and its projections for fiscal year 2025 assume that Kuwait will re-enter international markets for borrowing, with 30% of the budget deficit expected to be financed through these markets. The agency also highlighted that Kuwait’s total government debt remains low relative to GDP, estimated at 2.9% for fiscal year 2024.
If the debt law is enacted in fiscal year 2025, coupled with an anticipated fiscal deficit and lower oil prices, Kuwait’s government debt-to-GDP ratio is expected to increase to 6% in fiscal year 2025 and 9.2% in fiscal year 2026, despite the upcoming maturity of $4.5 billion in international bonds in 2027.
Fitch noted that the Kuwaiti government will continue to meet its financial obligations in the coming years, even without the passage of the debt law, thanks to its substantial financial assets. It highlighted that Kuwait has the smallest presence in global debt markets among Gulf countries, with its total debt holdings across all currencies declining by 7% to $31.5 billion by the end of January 2025.
Dollar Issues
Fitch reported that dollar-denominated issuances made up about 74% of Kuwait’s total debt issuances as of January 2025, while 26% were denominated in Kuwaiti dinars. It noted that around 30% of the debt is set to mature in 2025, 6% in 2026, and the remainder in 2027 and beyond.
Additionally, total Environmental, Social, and Governance (ESG) bond issuances in Kuwait reached approximately $1 billion by the end of January 2025, with sukuk accounting 50% of this amount. Government bonds and Central Bank of Kuwait securitizations comprised roughly 30% of the country’s total outstanding debt.
Fitch concluded that Kuwait’s debt market faces several challenges, including limited activity in both sovereign and corporate debt markets, a shortage of Kuwaiti dinar issuances, a strong reliance on bank-based financing, and a concentrated investor base primarily within Kuwaiti banks.
Source: Al Qabas
