A recent economic report highlighted that Kuwait’s return to the sovereign debt market after an eight-year absence could attract strong investor interest. The report emphasized that Kuwait’s sovereign debt issuance would be supported by its robust financial reserves, including the liquid assets of the Public Investment Authority, as well as its exceptionally low level of public debt.
The report quoted Fadi Jundi, Fixed Income Portfolio Manager at Arqaam Capital – Dubai, expressing his expectation that investors will show strong interest in Kuwait’s return to the debt bond market.
Jundi told Zawya that demand for Kuwaiti debt bonds will primarily come from local investors, including treasury offices with zero risk or minimal capital issuance fees, as well as a diverse group of international investors, particularly from Asia.
Moreover, Jundi continued, stating that investors specializing in emerging markets and transient investors may be less inclined towards Kuwaiti debt bonds due to their low yield and spread, a stance reflected in their current lower weighting compared to other rated Gulf sovereign debt.
Project Activity
For his part, Junaid Ansari, Director of Investment Strategy and Research at Kamco Investment Company, noted that Kuwait has sufficient project activity, and issuing sovereign debt bonds to finance the budget deficit could help mitigate its impact. With oil prices currently stable above $75 per barrel, he expects the fiscal deficit to fall below the level projected in the budget.
Ansari added that he does not expect Kuwait to rush into issuing large-sized bonds or sukuk. However, he noted that there may be some issuances aimed at entering the debt markets and testing investor demand.
Kuwait is committed to expanding its non-oil economy, as reflected in the surge of activity in the Kuwaiti projects market during 2024, with tenders reaching 9.5 billion dinars—the highest level since 2017. Ansari noted that the majority of these projects were government-driven, indicating a potential acceleration in non-oil economic activity in the near term.
Economic Reforms
Bhavesh Gandhi, Partner at KPMG Kuwait, stated that since oil prices have remained below the government’s budget breakeven price and are expected to stay at current levels, increasing debt issuance could help Kuwait mitigate any slowdown in implementing its planned economic reforms and assist in managing part of its fiscal deficit.
Gandhi added that while debt yields are expected to remain tight, Kuwait’s strong sovereign rating will offer investors an opportunity to diversify their investment risks. He also highlighted that Kuwait is making steady progress toward implementing “Vision 2035,” which focuses on building a diversified and sustainable economy.
“Public Debt” will support economic diversification
Gandhi stated that passing the debt law in Kuwait will bolster the country’s economic diversification efforts, enabling the launch of long-delayed infrastructure and tourism projects , which have been frozen for a long time.
Kuwait’s credit profile is among the best in the region
Ansari emphasized that Kuwait’s credit profile is among the strongest in the region, adding that the pricing of Kuwaiti debt bonds or sukuk is not expected to differ significantly from recent issuances by other regional countries.
Source: Al Qabas
