Kuwait upgraded to AA- by S&P on strong reform momentum

25/11/2025 02:25 AST

Kuwait secured an upgrade to AA- from A+ at S&P Global Ratings, which cited stronger reform momentum and reduced fiscal funding risks as the Gulf state accelerates its long-term economic overhaul.

In its latest release, the agency said the upgrade reflects Kuwait's accelerating progress on fiscal and economic reforms under its long-term Vision 2035 blueprint.

The rating agency highlighted the passing of a key "financing and liquidity law" in March as a pivotal moment, which has diversified the government's funding sources and reduced long-standing uncertainty over its budget financing.

"The upgrade reflects Kuwait's fiscal reform momentum and reduced fiscal funding constraints," the agency stated. It pointed in particular to Kuwait's successful return to international debt markets in October with an $11.25 billion bond issuance - its first since 2017 - which was oversubscribed by 2.5 times.

Despite forecasting continued high fiscal deficits, averaging 7 percent of gross domestic product from 2025 to 2028 due to assumptions of lower oil prices, the agency emphasized Kuwait's strong financial buffers.

The country's vast sovereign wealth fund, managed by the Kuwait Investment Authority, holds liquid assets estimated to average around 534 percent of GDP over the same period - one of the strongest ratios among rated sovereigns.

"Sizable net external and government asset positions provide the government with headroom for policy measures over the next few years," S&P added.

The stable outlook reflects the agency's expectation that Kuwait's strong balance sheets and ongoing reform drive will help mitigate risks from its reliance on the hydrocarbon sector and potential oil price volatility.

The report also addressed the domestic political landscape, suggesting that the suspension of parliament in May 2024 - though affecting checks and balances - has likely accelerated the pace of reforms.

The cabinet is now tasked with expediting a reform package that includes the introduction of excise and corporate taxes, repricing government services and state land leases, rationalizing subsidies, and optimizing government procurement.

S&P expects these efforts to strengthen Kuwait's non-oil revenue base over the medium to long term. The agency forecasts real GDP growth to rebound to an average of 2 percent over 2025 to 2028, supported by modestly higher oil production, large-scale infrastructure projects, and a resilient non-oil sector.

The upgrade places Kuwait's credit rating in a more elite global category, reflecting improved confidence in its economic management and substantial financial reserves. The transfer and convertibility assessment was also revised upward to AA from AA-.

Arab News