The Malaysian credit rating agency, MARC, affirmed Kuwait’s foreign currency sovereign rating at (AAA) with a stable outlook, based on Kuwait’s strong credit measures, noting that Kuwait’s strong credit rating reflects the strong financial and external reserves that the country enjoys.

The agency said in its report that however, Kuwait’s strengths are offset by its heavy dependence on oil and political tensions that still affect its economic decision-making, as well as weak governance and poor performance of government institutions, reports Al-Qabas daily.

In the past two years, Kuwait's economic prospects have improved due to relatively favorable oil prices and high production, after the country recorded its second worst economic performance since the global financial crisis in 2009, with a contraction of 8.9% in GDP in 2020.

Kuwait's gross domestic product is expected to grow 8.7% in 2022 and 2.6% in 2023, according to the International Monetary Fund.

Kuwait’s strong financial reserves remain its strongest credit advantage, through its sovereign fund, which is the fourth largest sovereign fund in the world, with an asset value of $750 billion, say sources.

The sources indicated that in the meantime, Kuwait’s position as a strong creditor country internationally is reflected in its high international investment position, which, according to the latest available data, amounted to about 691% of its gross domestic product in 2020, pointing out that despite its large financial reserves, it is likely that Kuwait’s structural risks will remain high, if tensions between the National Assembly and the government continue to influence decision-making and economic policies.

MARC confirmed that Kuwait’s stable future outlook reflects the balance of negative pressures and positive aspects on its credit rating, pointing out that on the positive side, the financial support coming from continuously high oil prices and high production may have a positive impact on the growth prospects of the Kuwaiti economy and better financial flexibility of expectations.

MARC explained that the weakness of departments and institutions in Kuwait constitutes negative credit indicators, noting that despite expectations of short-term risks that may decline with the improvement in oil prices and the increase in production, the high geopolitical and economic uncertainty confirms the urgent need for financial and structural reforms in the country.

The agency said that the negative aspects that may be reflected in its credit rating are summed up by the continued political stalemate in the country, which affects political and economic decisions in the country and keeps economic risks high.

Kuwait’s comprehensive and sustainable financing plans and economic rebalancing efforts would also reduce future economic risks.

The agency indicated that despite the availability of many economic plans and initiatives, Kuwait is still struggling to develop a non-oil economy through “Vision 2035”, which, if successful, will reduce dependence on oil and enhance human capital, in addition to greater participation of the private sector in economy.