KUWAIT Reuters Rating agency Fitch on Wednesday downgraded its outlook on Kuwaits sovereign debt rating to negative from stable, warning of nearterm liquidity risks associated with the state treasury fund.
The agency, which affirmed Kuwaits longterm rating at AA, said liquid assets in the General Reserve Fund GRF faced being depleted in the absence of parliamentary authorisation for the government to borrow.
Finance Minister Khalifa Hamada said in a statement that Kuwaits financial position was solid, supported by the much larger Future Generations Fund only tapped into once, during the First Gulf War.
But he acknowledged the neardepletion of the GRF due to structural imbalances in public finances. He said boosting liquidity in the GRF was among the governments top priorities and solutions were being explored.
An OPEC member state, Kuwait has been hit hard by lower oil prices and the COVID19 pandemic.
Repeated rows and deadlocks between cabinets and successive elected assemblies have led to several government reshuffles and dissolutions of parliament, hampering much needed economic reforms.
Without passage of a law permitting new debt issuance, the GRF could run out of liquidity in the coming months without further measures to replenish it Fitch said.
Depletion of GRF liquidity would sharply limit the governments ability to make good on its spending obligations and could result in significant economic disruption.
Fitch said its base case, however, was that the…