Monday 30 March 2020

Fiscal surpluses ‘driving Kuwait bonds’

Singapore, December 29, 2011

Structural fiscal and current account surpluses are the main drivers behind Kuwait's Aa2 government bond ratings and its stable outlook, said a credit report on Kuwait published by Moody's.

A gradual improvement in the Kuwaiti government's effectiveness is reflected in the recent privatization and labour laws and a four-year Development Plan demonstrate a renewed modernization drive, according to the annual credit report from Moody’s Investors Service, a top rating agency.

Kuwait's Aa2 rating peers include Bermuda, Qatar and the UAE.

The rating agency's report is an annual update to the markets and does not constitute a rating action.

According to the report, the country's vast hydrocarbon reserves underpin its "Very High" Economic Strength assessment by Moody's. These reserves generate a relatively high trend GDP growth rate and have boosted the country's per capita income to a level comparable with the median of advanced countries.

In addition, Kuwait's fiscal break-even oil price is low relative to recent price levels, which indicates that the country has ample budgetary headroom to manage global oil price shocks.

Moody's assessment of the country's Institutional Strength as "Moderate" reflects relative institutional shortcomings identified by the World Bank governance surveys, as well as transparency issues.

Moody's notes that surging hydrocarbon revenues, a wide fiscal surplus and the Kuwaiti government's large cushion of off-shore financial assets drive the "Very High" assessment of the country's Government Financial Strength.

Regional geopolitical risks are the primary driver behind Moody's assessment of Kuwait's Susceptibility to Event Risk as "Moderate." The rating agency considers domestic political risks to be low. Kuwait has not experienced contagion from regional political unrest, in large part because of its very high standard of living.

These four factor scores result in a methodology rating range for Kuwait of Aa3 to A2.

The one-notch differential between Kuwait's Aa2 ratings and the top of the indicated rating range is warranted by the country's exceptionally strong fiscal and external payments positions. – TradeArabia News Service

Tags: Kuwait | Moody’s | Government bonds | Credit report | Account surplus |

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