Kuwait Suffers Further Credit Downgrade

Moody’s Investor Service has downgraded Kuwait’s sovereign credit rating to A1, a decline of two levels. This follows a March downgrade by Standard & Poor’s Global Ratings. “The decision to downgrade the ratings reflects both the increase in government liquidity risks and a weaker assessment of Kuwait’s institutions and governance strength,” Moody’s said in a statement. “The fractious relationship between parliament and the executive is a long-standing constraint on Moody’s assessment of institutional strength. The deadlock over the government’s medium-term funding strategy and the absence of any meaningful fiscal consolidation measures point to more significant deficiencies in Kuwait’s legislative and executive institutions and policy effectiveness than previously assessed.” It noted that the government’s domestic challenges do not enable the country to issue debt or draw on its sovereign wealth fund assets in its Future Generations Fund. Without this, it said, “available liquid resources are nearing depletion…. despite the country’s extraordinary fiscal strength.”