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Kuwait’s bold political moves could fast-track crucial reforms: Moody’s

The credit rating agency stated, “The country’s internal political environment is challenging, which is restricting the prospects for meaningful reform and economic diversification.”

  • “Over the past years there has been limited progress in economic and financial diversification away from oil and gas, largely due to the unfruitful relationship between the government and Parliament,” Moody’s said.

  • “The tense relationship between the government and Parliament has hindered the formation of effective policies and restricted the ability to implement long-term reforms and respond to shocks.”

  • Moody’s believes that “the temporary dissolution of the National Assembly provides an opportunity for the government to move forward with credit-enhancing reforms, given the institutional obstacles that Kuwait has faced.”

The recent global report from Moody’s confirmed Kuwait’s sovereign rating at A1 with a stable outlook, while also acknowledging the country’s recent political events.

In its press statement regarding Kuwait’s credit rating, Moody’s stated that “the dissolution of the National Assembly and the temporary suspension of some relevant constitutional articles with the aim of overcoming institutional restrictions would lead to an acceleration of reforms,” while noting that “the internal political environment is difficult and full of challenges.” It further commented that “this restricts the prospects for reform and diversification.”

The agency noted “the unusual step of temporarily dissolving the National Assembly for up to four years in an attempt to address institutional obstacles to reform, but building a track record of reliable and effective policies will likely take some time.”

While Moody’s confirmed that “public debt levels remain low at less than about three percent of gross domestic product (GDP), partly due to the expiration of the public debt law in 2017,” the rating agency assumes that a new law will eventually be passed to allow the government to take on new debt. It also pointed out that “over the past years there has been limited progress in economic and financial diversification away from oil and gas, largely due to the unfruitful relationship between the government and Parliament, a relationship that has hampered reforms so far.”

Moody’s believes that “the temporary dissolution of the National Assembly provides an opportunity for the government to move forward with credit-enhancing reforms, given the institutional obstacles that Kuwait has faced. However, this carries the risk of undermining the credibility of the country’s institutional and governance framework if not used effectively.”

The agency pointed out that “the tense relationship between the government and Parliament has hindered the formation of effective policies and restricted the ability to implement long-term reforms and respond to shocks.” It indicated that the goal was “to increase the effectiveness of policies through the temporary dissolution of Parliament and eventual constitutional reform, albeit with the possibility of undermining the credibility of the institutional and governance framework if not used effectively.”




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