Kuwait’s strong fiscal position and external financial consistency have led Fitch Ratings to reaffirm its Long-Term Foreign-Currency Issuer Default Rating at AA-, with a stable outlook.
According to the United States-based ratings firm, Kuwait’s net foreign assets are expected to increase from an estimated 582% of GDP in 2024 to 601% in 2025, making its external balance sheet the strongest of all Fitch-rated sovereigns.
A rating of AA- indicates a strong ability to meet financial obligations and very low credit risk, according to Fitch. As nations in the Middle East gradually diversify their economies by reducing their reliance on crude income, Kuwait’s high rating aligns with this general trend.
While the UAE was rated AA-, Fitch Ratings confirmed Saudi Arabia’s IDR at A+ with a stable outlook in February. With a low default risk, the Kingdom’s A+ rating demonstrates Saudi Arabia’s strong ability to meet its financial obligations.
“The recently appointed government has initiated reforms aimed at reducing reliance on oil revenue, improving government efficiency, and rationalising spending, capping it at 24.5 billion dinars (USD 79.53 billion), accounting for about 51% of GDP,” said Fitch Ratings.
On January 1, the Kuwaiti government imposed a domestic minimum top-up tax of 15% on multinational corporations, according to the report. The estimated yearly revenue is 250 million dinars, or 0.5% of GDP, and it is anticipated that collections will begin by 2027.
Additionally, the government intends to implement the long-delayed excise tax in the fiscal year that concludes in March 2026.
“Fitch views the increase in reform efforts as positive. However, a significant overhaul of generous public wages and welfare spending (79% of total expenditure; 40% of GDP) is unlikely in the short term, given the state’s deep-rooted generosity toward Kuwaiti citizens and still favourable oil prices,” the analysis added.
Additionally, the Kuwaiti government intends to enact a debt and liquidity law that will allow the nation to take on additional debt. Fitch further stated that the passage of the law, the draft of which is being discussed by the Council of Ministers, would help Kuwait raise new debt to finance nearly 30% of the deficit.
Despite the absence of a public debt law enabling sovereign borrowing, Kuwaiti issuers were the Gulf Cooperation Council’s (GCC) third-largest US dollar debt issuers in 2024. The law is expected to be passed in the fiscal year ending March 2026, although delays are possible, Fitch noted.
Dollar issuance by the sovereign has not taken place since 2017, before the expiry of the previous debt law. However, dollar issuance by Kuwaiti issuers surged to USD 13.6 billion in 2024, up from USD 60 million in 2023, primarily driven by banks. The share of Sukuk in Kuwait’s debt capital market outstanding, on the other hand, rose to 27% by the end of January 2025.
Gross government debt/GDP remains low, at an estimated 2.9% in FY 2024. Fitch forecasts that government debt/GDP will rise if the liquidity law is passed in FY 2025, in addition to the projected deficits and lower oil prices. A USD 4.5 billion Eurobond is maturing in 2027.
“Even without a liquidity law, the government would still be able to meet its financing obligations in the coming years,” the rating agency concluded.