New York’s S&P slashes Kuwait’s credit rating amid lack of deficit-financing strategy

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New York’s S&P slashes Kuwait’s credit rating amid lack of deficit-financing strategy

S&P Global Inc., the New York City-based American credit rating agency often contemplated as one of Big Three alongside Moody’s and Fitch Ratings, had downgraded Kuwait’s sovereign credit rating to 'AA-' from a prior 'A+' and kept the country’s outlook negative, the rating agency said in a statement on Friday.

In point of fact, S&P Global had cited a material lag in the Gulf country’s stratagem to finance debts amid a protracted stand-off between parliament and the Government. Nevertheless, Kuwait had been facing off a steeper liquidity risk after having been dashed by an ultra-low oil prices in 2020 alongside the pandemic’s fiscal consequences, as the Gulf country’s parliament had not been granting government borrowings amid a political gridlock, stated the rating agency.

Fossil—fuel rich Kuwait has been the only Gulf monarchy that gave away an upscaled power to an elected Government having had constitutional rights to block laws and question lawmakers, though frequent spats between the assembly and cabinet members had led to a number of Government reshuffles and dissolution of parliaments over recent years, putting a kibosh on the investments and a much-required fiscal overhaul.

S&P Global slashes Kuwait’s credit rating by one notch to AA-

Meanwhile, adding that Kuwait would likely to be met with a central Government deficit of an average of 17 per cent of its gross outputs between fiscal 2021 and 2024 following a 33 per cent deficit logged in the past fiscal year that ended on March 31, 2021, S&P Global said in a statement on Saturday, “The downgrade reflects a persistent lack of a comprehensive funding strategy despite the central government’s ongoing sizeable deficits.

Due to parliamentary opposition, the government has so far been unable to pass a law giving it the authority to issue debt or gain immediate access to its large stock of accumulated assets.