Kuwait’s Cabinet has approved a debt law allowing bond sales for the first time in eight years, with potential to raise $65 billion. The law aims to enhance financing for development projects and address fiscal deficits. Political dysfunction has stalled previous efforts, but the government is now poised to expedite legislative changes.
Kuwait’s Council of Ministers has approved a draft decree that permits the country to issue debt for the first time in eight years. This significant development, relating to a public debt law, was presented by Finance Minister Noura Al-Fassam during a Thursday meeting. More details regarding the specifics of the approval were not disclosed in the cabinet’s statement.
The proposed legislation seeks to enable the nation to raise approximately 20 billion Kuwaiti dinars ($65 billion) over a period of 50 years. However, there is potential for the debt ceiling to increase to 30 billion dinars in the final draft. The decree must now receive approval from Emir Sheikh Mishaal Al-Ahmed Al-Sabah, who oversees all legislative matters.
Bader Al Saif, an academic at Kuwait University, remarked, “Better late than never,” highlighting the importance of bold action to prevent the nation’s potential from declining. The absence of a public debt law has previously hindered the government’s borrowing capabilities, compelling reliance on the General Reserve Fund to finance essential projects.
Kuwait, a vital U.S. ally and significant oil exporter, last issued debt in March 2017 with an $8 billion deal, shortly before its previous debt law expired. In May, the ruler of Kuwait suspended parliament for four years, granting the government, appointed by the ruling Al-Sabah family, the authority to expedite critical legislation.
Political infighting has historically obstructed progress and deterred international investment in Kuwait, offering challenges to fiscal reform and diversification away from oil dependency. Upon the law’s enactment, Kuwait would gain the ability to issue both traditional bonds and Islamic Sukuk, utilizing bond markets as necessary to support development initiatives.
There is optimism regarding Kuwait’s legislative developments, as noted by Al-Saif, stating that the nation is actively pursuing crucial decisions and communicating them effectively, signaling Kuwait’s resurgence on the international stage.
In summary, the recent approval by Kuwait’s Cabinet to advance a public debt law is a pivotal moment for the nation, marking its first opportunity to sell debt since 2015. This legislation could enable significant borrowing to fund essential projects and address fiscal challenges. Despite historical political obstacles, the current government appears determined to facilitate economic advancements and improve Kuwait’s financial landscape.
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