Kuwait’s outlook remains stable on strong credit buffers

Dubai: The recent escalation in political protests in Kuwait is not likely to affect the government’s very strong credit fundamentals, Moody’s said in a report on Wednesday.

Despite the recent fall in Kuwait’s stock market index, the long-running clashes in parliament have not adversely affected the Kuwaiti government’s large budget surplus, robust net financial asset position, nor its willingness to service its outstanding debt. Importantly, the protests so far are not Arab Spring-type events, credit rating agency said.

Moody’s said Kuwait has the strongest core financial buffers of any country globally, having recorded large budgetary surpluses for more than a decade and accumulated a very large buffer of net financial assets. These strong financials have so far not been adversely affected by the long-running clash in parliament.

“Political developments to date have been consistent with our assessment of Kuwait’s relatively ‘moderate’ institutional strength, and we consider that Kuwait’s Aa2 rating can tolerate a degree of political event risk,” Thomas J. Byrne, Senior Vice President of Moody’s wrote in a note.

“In our view, a credit-negative situation could only develop if there were a severe turn for the worse in Kuwait’s political and social stability that would paralyse government fiscal operations or undermine domestic financial system stability. At this juncture, we consider such an outcome unlikely,” he said.