DUBAI (Reuters) – Ratings agency S&P Global Ratings cut Kuwait\u2019s rating by one notch citing the Gulf state\u2019s lack of a funding strategy to finance its deficit.<\/p>\n
Hit hard by lower oil prices and the COVID-19 pandemic last year, Kuwait faces liquidity risks largely because parliament has not authorised government borrowing due to a standoff.<\/p>\n
S&P cut Kuwait\u2019s rating by one notch to A+ from AA-(minus) and kept its outlook on the country negative, it said in a statement late on Friday.<\/p>\n
\u201cThe downgrade reflects a persistent lack of a comprehensive funding strategy despite the central government\u2019s ongoing sizeable deficits,\u201d it said.<\/p>\n
\u201cDue to parliamentary opposition, the government has so far been unable to pass a law giving it the authority to issue debt or gain immediate access to its large stock of accumulated assets\u201d.<\/p>\n
S&P expects central government deficits to average 17% of gross domestic product annually between 2021 and 2024. In the fiscal year that ended in March, the country ran a central government deficit of 33% of GDP, S&P estimated.<\/p>\n
Despite a sluggish pace of reforms, the agency said it still expected Kuwait to eventually adopt a debt law that would allow the government to borrow or overcome parliamentary opposition to gain access to funding alternatives.<\/p>\n
S&P had already cut the rating of the OPEC member state last year due to lower oil prices.<\/p>\n
Oil-rich Kuwait is the only Gulf monarchy to give substantial powers to an elected parliament, which can block laws and question ministers.<\/p>\n
Frequent rows between the cabinet and assembly have led to successive government reshuffles and dissolutions of parliament over decades, hampering investment and reforms.<\/p>\n