Kuwait’s Cabinet approved a draft public debt law, enabling the country to issue debt for the first time in eight years. The law, which allows for raising up to 20 billion dinars, addresses previous political instability that inhibited government borrowing. Analysts stress the importance of decisive action to realize Kuwait’s economic potential.
The Council of Ministers in Kuwait has approved a draft decree that allows the nation to issue debt for the first time in eight years. This decision pertains to a public debt law aimed at enhancing financing and liquidity. Details regarding the decree were not disclosed post the Thursday meeting, yet Finance Minister Noura Al-Fassam presented the proposal to Emir Sheikh Mishaal Al-Ahmed Al-Sabah for final approval.
The initially proposed law enables the country to raise up to 20 billion dinars (approximately $65 billion) over a 50-year term, although sources indicated that the cap might increase to 30 billion dinars in the final version. Bader Al Saif, an assistant professor at Kuwait University, remarked on the importance of timely action, stating that “Kuwait’s potential is real and immense.” He emphasized that without decisive measures, this potential could diminish.
Kuwait’s absence of a public debt law has hindered previous governments from borrowing, compelling reliance on the General Reserve Fund. The country now intends to access international markets for funding critical development projects and addressing fiscal deficits as necessary. As a significant US ally and a leading oil exporter, Kuwait possesses a sovereign wealth fund valued at around $1 trillion.
Political instability has long obstructed progress, frustrating reforms and discouraging foreign investment. Notably, Kuwait’s ruler had suspended parliament for four years, thereby facilitating the government’s ability to pass essential legislation. The new law will permit the issuance of both conventional bonds and Islamic Sukuk, with plans to enter bond markets only as needed.
Al-Saif further noted that Kuwait is making substantial decisions while asserting its return to the global financial stage. He stated, “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.'”
The approval of the public debt law by the Kuwait Cabinet marks a significant shift in the country’s financial strategy, allowing for debt issuance after an eight-year hiatus. This legislation, which aims to raise substantial capital for development projects, comes in the wake of political challenges that have previously impeded economic progress. The potential for Kuwait to engage with international bond markets signifies a proactive approach to addressing fiscal deficits and diversifying its economy.
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