Latest news with #MohammedAl-Asumi
Zawya
08-04-2025
- Business
- Zawya
New debt law triples Kuwait's loan ceiling
Kuwait has tripled the maximum loan it can get from local and global markets within the much-anticipated debt law it approved last month. An Emiri decree set the new debt ceiling at 30 billion Kuwaiti dinars ($99 billion) in the new law which replaced a previous debt law with a ceiling of KWD10 billion ($33 billion). The new law allows the government to borrow up to $99 billion over a period of 50 years to fund budget deficits and infrastructure projects beyond withdrawal from the Gulf state's financial reserves abroad. 'The Emiri decree replaced the debt law which expired on 4 October 2017 and which set the loan ceiling at KWD10 billion…the new ceiling is KWD30 billion,' said Kuwait's daily Aljardia, which published the Emiri decree, citing the official gazette. The approval of the 'financing and liquidity' law after eight years of government-parliament haggling coincides with widening budget deficits due to spiraling spending on wages to public servants and subsidies to citizens. While the law will enable the OPEC member to shun depleting its overseas reserves, analysts warn against the improper use of the loans. 'This law allows Kuwait to shore up the fiscal shortfall and fund development projects if oil revenues decline without the need to directly withdraw from the general reserves,' said Mohammed Al-Asumi, a Dubai-based economic adviser. 'But it could be harmful if it is used to cover salaries and other parts of the current expenditure…there is also a risk of excessive reliance on borrowing.' Kuwaiti Finance Minister Noura Al-Fassam said last week the debt law gives the emirate greater flexibility by allowing it to tap local and global markets. 'This reflects a strategic approach to keep pace with global economic developments and ensuring the sustainability of the state's public finances. This law is part of the government's efforts to enhance financial stability and support economic development in line with Kuwait's Vision 2035,' she said. Faisal Al-Muzaini, Director of the Public Debt Management Department at the Ministry of Finance, said the new law reflects the government's commitment to adopting a sustainable financial approach that balances the need to finance development projects and ensure long-term financial sustainability. In a weekend report, National Bank of Kuwait (NBK) said the debt law will increase the options available to the government to finance current and future fiscal deficits beyond drawing down reserves at the General Reserve Fund, the government's cash flow account. 'Moreover, the new law will facilitate the establishment of a sovereign yield reference curve and catalyse bond issuance and the debt markets more broadly going forward….it is also an important step in stimulating capital project financing avenues and should help in strengthening Kuwait's sovereign credit rating,' it said. Kuwait's last foray in the bond markets was in 2017 when it raised about KWD 2.5 billion ($8 billion) in five and 10-year Eurobonds. In 2021, Kuwait was reported by local newspapers to have withdrawn nearly KWD 7.5 billion ($24.7 billion) from the Future Generation Fund to cover a large budget deficit during fiscal year 2021-2022. Kuwait's think-tank Al-Shal Centre said last week that borrowing would not resolve the Emirate's fiscal problems. 'It does not matter whether we support or oppose the debt law…but providing liquidity to a government with expenditures above 50 percent of GDP, and with an efficiency rate of 0.54, compared to a global average of 37 per cent of GDP with an efficiency rate of 0.74, will only deepen the financial imbalance,' it said. (Reporting by Nadim Kawach; Editing by Anoop Menon)
Zawya
20-03-2025
- Business
- Zawya
GCC SWFs set for more growth
When they decided to create funds to save part of their oil export earnings, Gulf Arab countries perhaps did not expect these burgeoning windfalls to rocket to that level. Two of their sovereign wealth funds (SWFs) have just surpassed the trillion-dollar mark while a third one has reached the final loop in the race to break that mark. At more than $3.5 trillion, the assets of four SWFs in Saudi Arabia, the UAE, Kuwait and Qatar could be worth 10-year oil revenues at the current prices and crude export rate. But how such a windfall has swelled so fast against changing oil production and persistent storms in the global financial markets? 'I consider the Gulf wealth funds as great stories of success and started from scratch and now look at what they have achieved,' said Mohammed Al-Asumi, a Dubai-based economic adviser. 'Over the past few years, their assets have grown fast mainly because of relatively strong oil the most important factor is that these SWFs are managed is the good asset management which tells the real story,' he told Zawya Projects. In mid-2020, the combined financial assets of the SWFs in those four Gulf nations stood at around $1.977 trillion, according to figures gathered by ZP from previous reports by the US-based SWF Institute. The assets surged to around $2.49 trillion in September 2022 and about $2.907 trillion at the end of 2023. They are now estimated at around $3.537 trillion, an increase of nearly $1.56 trillion in 4.5 years. ADIA surges A breakdown showed the assets of the Abu Dhabi Investment Authority (ADIA), the largest SWF in the six-nation Gulf Cooperation Council (GCC), leaped from about $697 billion in mid-2020 to $1057 trillion at present. Those of the Kuwait Investment Authority (KIA) soared from around $592 billion to $1.029 trillion while the assets of the Saudi Public Investment Fund (PIF) nearly tripled from around $360 billion to $925 billion in the same period. The Qatar Investment Authority (QIA) also saw its assets swelling from around $328 billion to $526 billion, the SWF Institute report showed. The figures showed these funds are now among the world's 10 largest SWFs and account for nearly a quarter of the total global SWF assets of $13.7 trillion. High earnings 'The GCC SWFs are generating large sums of I believe they will continue to grow because their policy is to strictly avert withdrawing from those funds to finance the budget deficit or other needs,' said Ihsan Buhlaiga, a Saudi economist and former member of the Shura (appointed parliament). 'As for the PIF, it has set a target to reach $one trillion and I am sure it will reach it in the near forget that the PIF is concentrating on maximising return and several affiliated companies will soon start achieving revenues as their goal is not only to develop the PIF has a clear and definite strategy for supporting the national economy and increasing overseas investments...I don't think it will deviate from this strategy which is vital for the country,' Buhlaiga told Zawya Projects. He noted that Saudi Arabia has persistently shunned withdrawing from PIF reserves and instead resorted to borrowing from the local and foreign markets to fund its fiscal deficits. As a result, the Saudi public debt has steadily grown over the past few years. Sitting atop the world's second largest recoverable oil resources, Saudi Arabia has suffered from budget deficits in most years in the past decade, with the exception of 2022, when crude prices shot above $100. Saudi borrowing Annual borrowing caused its public debt to swell from around SAR 854 billion ($227.7 billion) at the end of 2020 to SAR 1,216 billion ($324.2 billion) at the end of 2024, according to the Riyadh-based Jadwa investment and consultancy firm, which expects the debt to climb to SAR1,343 billion ($358 billion) at the end of 2025. Kuwait has also suffered from budget deficits in the past five years but it did not resort to SWF withdrawals. Local newspapers, however, said the government was forced to withdraw nearly 7.5 billion dinars ($24.7 billion) from the Future Generation Fund to cover a large budget deficit during 2021-2022. Kuwait is also planning to revive its defunct debt law after an eight-year gap to borrow nearly $66 billion over the next 20 years to support its budget. The UAE and Qatar are different as their budgets have recorded surpluses in most years in the past decade, allowing them to largely replenish their SWFs and stave off borrowing large funds. UAE surplus Figures by the Abu Dhabi-based Arab Monetary Fund showed the UAE budget basked under a massive cumulative fiscal surplus of nearly $102.7 billion during 2021-2023 while the surplus in Qatar's budget stood at around $38 billion during the same period. In 2024, the UAE was expected by Fitch ratings agency to record another surplus of 4.1 percent of GDP while Qatar's budget registered a surplus of about $1.6 billion, according to the Qatari Finance Ministry. The Singapore-based Global SWF said in a report last year that the Gulf SWF assets under management, including those of Abu Dhabi Mubadala Development company and other GCC members, are projected to swell to $7.6 trillion in 2030 as regional states intensified a drive to diversify their economies. 'SWFs have become a key source of income for the GCC countries, a strong fiscal cushion and the backbone of their economies along with all started as a dream and it has almost been fulfilled,' Asumi said. (Reporting by Nadim Kawach; Editing by Anoop Menon)
