a day ago
Kuwaiti aims to borrow $10-20bln to narrow fiscal deficit in 2025-26
The Kuwaiti government plans to borrow 3-6 billion Kuwait dinars ($10-20 billion) in fiscal year (FY) 2025/26 through conventional and Islamic instruments as the fiscal deficit widens, CI Capital said in a report.
The Gulf nation's fiscal deficit is expected to widen to KWD 3.8 billion in FY 2025/26 from KWD 1.2 billion in FY 2024/25, primarily on weaker oil revenues.
'We expect the shortfall to be fully financed by local and external borrowing, as the March 2025 debt law approval allows up to KWD 30 billion in debt instruments over 50 years,' economists Hekmat El Matbouly and Sara Saada of the Egypt-based investment bank added.
Local banks have raised KWD 850 million through offerings so far this year, a trend expected to continue.
Deficit financing via borrowing helps preserve the general reserve fund (GRF) and maintain sovereign buffer capacity, the report added.
The real GDP is forecast to grow 0.2% in 2025, reversing a two-year contraction, amid a 2.1% increase in non-oil GDP.
Although FY 2025-2026 capex is slated to fall by 1.6% year-on-year (YoY) to a fresh low of KWD 1.8 billion, CI Capital expects planned debt issuances to provide fresh liquidity for project activity.
Meanwhile, oil GDP is expected to rebound to 2.6% in 2026, compared to -1.8% in 2025 as crude production recovers.
Kuwait Petroleum Corporation is planning to raise output to 4 million barrels per day (bpd) by 20235 from 3.2 million bpd, signalling a long-term upside for the oil sector.
However, consumer spending continued to decline by 5.3% YoY to KWD 11.3 billion in the first quarter of 2025 due to higher borrowing costs and limited government wage spending.
'We expect recovery as job creation picks up with project activity,' the report said.
Steady inflation at 2.4% in the first six months of 2025, compared to 3.1% the same period last year, is expected to support real income and aid the recovery of consumer activity, CI Capital stated.
