Kuwait’s Council of Ministers approved a public debt law, allowing bond sales for the first time in eight years. The law could potentially raise up to 30 billion dinars. This move aims to support development projects and financial stability amidst past political stagnation.
The Kuwaiti Council of Ministers has approved a draft decree facilitating the sale of public debt for the first time in eight years. This decision comes after Finance Minister Noura Al-Fassam presented a public debt law, now awaiting approval from Emir Sheikh Mishaal Al-Ahmed Al-Sabah. No further details on the decree were disclosed at the time.
Originally, the law would allow Kuwait to raise up to 20 billion dinars (approximately $65 billion) over 50 years. However, sources indicate that modifications could lift this cap to 30 billion dinars in the final version.
Bader Al Saif, an academic at Kuwait University, remarked, “Better late than never. Kuwait’s potential is real and immense; however, urgent actions are necessary to harness it.” The absence of a public debt law had hindered previous governments from borrowing funds, necessitating reliance on the General Reserve Fund for financing.
Kuwait aims to access international markets primarily to support development initiatives and finance its fiscal deficit. A significant player in global oil production, the nation has a sovereign wealth fund valued around $1 trillion, yet has not issued any debt since a $8 billion deal in March 2017.
In May, Kuwait’s ruler suspended parliament for four years, enabling the government led by the Al-Sabah family to advance crucial legislation. Political dysfunction has historically impeded the country’s development and foreign investments.
Upon implementation of the new law, Kuwait will be empowered to issue both conventional bonds and Islamic Sukuk. According to sources, the government intends to approach the bond markets only when absolutely necessary. Al-Saif expressed optimism, stating that Kuwait is effectively making and communicating strategic decisions to reaffirm its economic viability.
The Kuwaiti Cabinet’s approval of the public debt law marks a significant shift after years of political contention, enabling the country to access international bond markets for developmental financing. With potential increases to the debt ceiling, Kuwait is poised to not only leverage its financial capabilities but also reaffirm its economic stature amidst ongoing challenges. As this law seeks to revitalize economic growth and attract foreign investment, swift and effective implementation will be crucial for achieving intended outcomes.
Original Source: www.livemint.com
