Unlike the rest of the member countries of the Gulf Cooperation Council, Kuwait has a freely elected parliament (or with a higher than average degree of freedom) and, consequently, also exercises a fairly effective task of controlling the executive.
Less than three years ago, it approved a law that prevents Tesoro go to finance themselves international debt markets and in fact, the last international bond issue carried out by Kuwait, dates back to 2017. The problem is that for several years now, the Kuwaiti public accounts have been recording deficits that in 2020 there have been seen aggravated by the pandemic. Although international oil prices have risen 250% since last April, they are still well below the $90/b that Kuwait would need to balance its budgets.
![[Img # 39809]](https://empresaexterior.com/upload/images/02_2021/5145_kuwait.jpg)
To date, the authorities had managed to finance the deficit by selling stakes in public companies (since the Zain telecommunications company to the oil company Kuwait Petroleum Corp, to Kuwait Finance House) to the sovereign fund Future Generation Fund (FGF) which, with some $600.000 million in assets, is the most important in the country.
However, the Tesoro has already run out of assets to offer to change of monetary contributions, and, if the situation is not remedied, Kuwait, a high-income country, will have problems financing the public deficit projected at 7,3% of GDP for the 2021/22 fiscal year, which will begin next April XNUMX . The solutions being considered range from the introduction of new taxes to a temporary repeal of the debt law, including even a devaluation of the dinar, whose price in Kuwait It is not linked exclusively to the dollar, but to a basket of currencies.
However, parliament is emphatically opposed to the first two, arguing that if the executive were to reduce superfluous spending and combat corruption, it could free up enough resources to finance the public deficit without needing to take on new debt or increase the tax burden of citizens.
With regards to devaluation, would hardly be effective for a country that, like Kuwait, practically only exports hydrocarbons but imports practically all of the products it consumes. The current impasse, therefore, has a difficult solution and the rating agencies are aware of this. About ten days ago, Fitch Ratings worsened Kuwait's outlook from “stable” to “negative” and Standard & Poor's has threatened to downgrade the country's sovereign rating which, in any case, would continue to be Investment Grade.
Source: CESCE
