Moody's Investors Service has downgraded Kuwait's long-term issuer outlook, citing higher liquidity risks and weaker governance and institutional strength, battered by low oil prices and struggles to pass a law allowing it to issue international debt.
"In the continued absence of legal authorization to issue debt or draw on the sovereign wealth fund assets held in the Future Generations Fund, available liquid resources are nearing depletion, introducing liquidity risk despite Kuwait's extraordinary fiscal strength," the rating agency said.
Moody's Investor Service downgraded Kuwait by two notches.
When Kuwait last issued debt in the international markets in 2017, its bonds traded close to paper issued by Abu Dhabi, considered the safest credit in the region, as a vast oil-driven financial wealth gave investors’ confidence.
But the nearly USD140 billion economy is now facing a yawning deficit of USD46 billion, caused by the coronavirus crisis, low oil prices, and a back and forth between government and parliament over a new debt law which is limiting its ability to boost state coffers.
Earlier this month Kuwait cut around USD3 billion from its 2020/2021 budget as it seeks to save money.
The debt law that the government is trying to pass would allow it to raise its debt ceiling and tap international investors. But lawmakers first want to see plans to reform the economy and shift its heavy reliance on oil, which made up 89 percent of revenues last fiscal year.
