Kuwait Cabinet Approves Debt Law, Enabling Bond Issuance

Kuwait’s Council of Ministers has approved a draft decree allowing debt sales for the first time in eight years. Finance Minister Noura Al-Fassam presented the law, expected to raise up to 20 billion dinars. Approval from Emir Sheikh Mishaal Al-Ahmed Al-Sabah is needed. Analysts view this move as a significant step toward unlocking Kuwait’s economic potential.

The Council of Ministers of Kuwait has approved a draft decree aimed at facilitating bond sales, marking the first such move in eight years for the Gulf state. This development was confirmed through a statement issued following the cabinet meeting on Thursday, specifically regarding a law focused on public debt. No further details were disclosed at this time.

Presented by Finance Minister Noura Al-Fassam, the awaited decree needs approval from Emir Sheikh Mishaal Al-Ahmed Al-Sabah, as is customary for all laws in Kuwait. Originally, the draft proposed raising up to 20 billion dinars (approximately $65 billion) over a period of 50 years, but deliberations may allow for a revised cap of 30 billion dinars, as indicated by anonymous sources familiar with the situation.

Bader Al Saif, an assistant professor at Kuwait University and associate fellow at Chatham House, commented positively on the move, stating, “Better late than never. Kuwait’s potential is real and immense. But in the absence of a bold and urgent set of actions, the country’s potential will soon dissipate.”

Due to the absence of a public debt law prolonged by political disputes, Kuwait has been unable to borrow, relying instead on its General Reserve Fund. The state seeks to access international markets primarily for funding essential development projects and addressing its fiscal deficit.

As a pivotal US ally in the Middle East and one of the largest oil exporters globally, Kuwait is home to a sovereign wealth fund with a valuation approaching $1 trillion. The last bond issuance took place in March 2017, amounting to $8 billion in a 10-year deal, shortly before the previous debt law lapsed.

In May, Kuwait’s ruler suspended parliament for four years, allowing the government, led by the ruling Al-Sabah family, to progress with key legislative initiatives. This suspension impacted the Gulf Cooperation Council’s only elected parliament, which has experienced political dysfunction and hindered economic development efforts.

Upon implementation, the new law would empower Kuwait to issue both conventional bonds and Islamic Sukuk. Reports suggest that Kuwait plans to approach bond markets selectively and only when necessary. Al-Saif remarked, “Kuwait is not only taking the right decisions fairly quickly but communicating these decisions in the most bombastic way if the goal is to prove that ‘Kuwait is back.’”

Kuwait’s approval of the draft debt law is a significant step towards economic revitalization, enabling bond sales for the first time in eight years. With intentions to raise substantial funds and address fiscal challenges, the government aims to bolster development projects while navigating past political obstacles. The Emir’s approval is crucial for this long-anticipated law to come into effect, potentially transforming Kuwait’s financial landscape.

Original Source: www.livemint.com