MARC affirms Kuwait's sovereign rating at AAA

July 27, 2020. Kuala Lumpur: MARC has affirmed the State of Kuwait’s (Kuwait) foreign currency sovereign rating of AAA with a stable outlook based on MARC’s national rating scale. The rating reflects Kuwait’s robust fiscal and external buffers.  Its credit strengths are, however, tempered by its heavy reliance on oil, as well as weak governance and institutions. The stable outlook is based on MARC’s expectation of Kuwait’s ability to respond effectively to domestic and external developments without eroding its considerable buffers.

Oil-rich Kuwait’s exceptionally large fiscal and external buffers are strong rating supports. The Kuwait Investment Authority (KIA), its sovereign wealth fund, is the fourth largest in the world and has an estimated USD533.7 billion (396% of GDP) of assets under management. Its General Reserve Fund (GRF), which can be drawn down to finance the government’s budgetary operations, provides a significant financial buffer against potential economic shocks. Meanwhile, current account surpluses continue to strengthen the country’s buffers against external shocks. Its strong external position is also reflected in its net international investment position (NIIP), which stood at a robust 91.8% of gross domestic product (GDP) as at 3Q2019.