Kuwait Poised to Re-Enter Debt Markets with $65 Billion Borrowing Authority

Kuwait is set to issue sovereign debt for the first time in eight years, with the government poised to approve a new law authorizing the issuance of 20 billion Kuwaiti dinars ($65 billion) over a 50-year period.

The decree would enable the OPEC member to tap both conventional bond markets and Islamic Sukuk issuance, according to anonymous sources close to the situation. The debt ceiling may be increased in the final draft, as previous proposals suggested a limit of 30 billion dinars.

Kuwait intends to access bond markets only as needed, the sources stated. The country's last issuance was in March 2017, for $8 billion, just before the previous debt law expired. This remains Kuwait's sole outstanding Eurobond and trades at a yield of approximately 4.9%, among the lowest for emerging market sovereigns.

The Ministry of Finance has yet to comment on the matter. Kuwait's lack of a public debt law, attributed to political disputes in parliament, has hindered successive governments from borrowing, compelling them to rely on the General Reserve Fund (treasury).

Kuwait plans to utilize international markets primarily to fund critical development projects and potentially cover fiscal deficits.

The suspension of parliament for four years by Kuwait's ruler, Sheikh Mishaal Al-Ahmed Al-Sabah, in May 2023, has paved the way for the government to pass significant legislation. Delays have been caused by conflicts between ministers appointed by the ruling Al-Sabah family and elected lawmakers.

Kuwait, considered one of the slowest reformers among Gulf Arab economies, has lagged behind its neighbors in reducing subsidies and implementing taxes, which together with state-sector salaries constitute over 80% of government spending. The finance ministry recently announced the imposition of a new tax on multinational corporations effective January 1, 2025, requiring a minimum 15% profit tax rate.

Kuwait's debt-to-GDP ratio is among the lowest globally at approximately 7%, per the International Monetary Fund (IMF). This figure is projected to increase to 25% by 2029.

Since the suspension of parliament, the government has emphasized reform and development, pledging to expedite projects, boost growth, and attract foreign investment while pursuing ambitious economic diversification plans. Lawmakers previously argued the need for budget reforms prior to approving a public debt law, urging the government to improve financial management before resorting to borrowing.