DUBAI (Reuters) – Rating agency S&P Global Ratings downgraded Kuwait a notch, citing the Gulf state’s lack of funding strategy to fund its deficit.
Hit hard by falling oil prices and the COVID-19 pandemic last year, Kuwait faces liquidity risks largely because parliament has not authorized government borrowing due to deadlock.
S&P downgraded Kuwait’s rating one notch to A + from AA- (minus) and maintained its negative outlook on the country, it said in a statement Friday night.
“The downgrade reflects the continued lack of a comprehensive financing strategy despite the central government’s sizable deficits,” he said.
“Due to parliamentary opposition, the government has so far been unable to pass a law giving it the power to issue debt or immediately access its large stock of accumulated assets. “.
S&P expects central government deficits to average 17% of gross domestic product per year between 2021 and 2024. In the fiscal year that ended in March, the country ran a government deficit. central by 33% of GDP, estimated S&P.
Despite a slow pace of reforms, the agency said it still expects Kuwait to eventually pass a debt law that would allow the government to borrow or overcome parliamentary opposition to gain access to debt. financing alternatives.
S&P had already downgraded the rating of the OPEC member state last year due to falling oil prices.
Oil-rich Kuwait is the only Gulf monarchy to give substantial powers to an elected parliament, which can block laws and question ministers.
Frequent feuds between cabinet and assembly have led to successive government shifts and parliamentary dissolutions over the decades, hampering investment and reform.
Reporting by Davide Barbuscia; Editing by Kirsten Donovan