Fitch Affirms Kuwait’s long-term foreign-currency IDR at ‘AA’

Fitch Affirms Kuwait's long-term foreign-currency IDR at 'AA'

Credit rating agency, Fitch has affirmed Kuwait’s long-term foreign-currency Issuer Default Rating (IDR) at ‘AA’ with a stable outlook.

“Kuwait’s key credit strengths are its exceptionally strong fiscal and external balance sheets.

Kuwait’s institutional paralysis and slow pace increasingly offset these. This is in addressing growing public finance challenges stemming from heavy oil dependence,” it said in its report.

Fitch estimated the foreign assets of the KIA at ~$529bn at the end of the fiscal year ending March 2020. It accounts for the bulk of Kuwait’s sovereign net foreign asset position of 472% of GDP; the highest of any Fitch-rated sovereign.

“The Reserve Fund for Future Generations (RFFG) accounted for around $489bn. It has grown over an extended period due to investment returns. Besides, the statutory annual transfer of 10% of government revenue,” it noted.

Also, Fitch said that in 2020, overall real GDP growth is likely to be positive amid an expansion of oil production and the commissioning of refinery upgrades, although disruptions related to the coronavirus will likely push the non-oil economy into recession for the year.

However, the banking sector could absorb a rise in problem loans, being adequately capitalised, liquid and profitable, it noted.