KUWAIT CITY: In
response to Kuwait’s fiscal challenges and the need for development funding,
preliminary steps are underway to establish a market for trading government
bonds.
This initiative
aims to provide an additional financing avenue for several key projects,
including the Failaka Island development, Al-Shaqaya Renewable Energy Complex,
Northern Economic Zone, Digital economy projects, Mubarak Al-Kabeer Port
expansion, housing projects and renewable energy and other development
ventures.
According to
the Finance Minister, Kuwait is expected to face a cumulative budget deficit of
approximately 26 billion dinars between the fiscal years 2025-2026 and
2028-2029, based on an average oil price of $76 per barrel. To address this
deficit and fund development projects, there is a push to establish a market
for government bonds and sukuks.
This initiative
is expected to support capital spending and provide a stable investment outlet.
Government development bonds are seen as risk-free obligations from the
government, offering a secure investment option. The bonds will be tradable in
the Kuwaiti market, with prices determined by supply and demand. Kuwait has
previously issued bonds in 2014 and 2017, and has outstanding local and global
debts totaling around 3.040 billion dinars.
This includes
210 million dinars (80 million dinars in Islamic bonds and 130 million dinars
in conventional bonds due between 2024 and 2027); 1.370 billion dinars due on
March 20, 2027, from an issuance on March 20, 2017, at a fixed interest rate of
3.5 percent; efforts to create a secondary market for trading these bonds, a
move anticipated to enhance liquidity and provide better financing options for
development projects and the Capital Markets Authority working to include
commercial bonds and instruments on the stock platform, which will facilitate
the establishment of this new bond market. The initiative is part of broader
efforts to improve Kuwait’s financial situation and diversify its non-oil
resources.