Standard & Poor’s Ratings Services said it has maintained sovereign credit ratings for Kuwait at AA on strong financial resources with a stable outlook. S&P “affirmed its ‘AA/A-1+’ long- and short-term foreign and local currency sovereign credit ratings on Kuwait,” said the ratings agency. “The ratings on Kuwait are supported by the sovereign’s rich resource endowment, which has led to high levels of wealth and enabled it to build very strong external and fiscal balance sheet positions,” it said.
The ratings are however constrained by “our view of Kuwait’s underdeveloped private sector, strong dependence on oil revenues, latent geopolitical risks and the lack of transparency regarding government assets”, it said. The OPEC’s third largest producer, pumping around 3.0 million barrels per day, has had a budget surplus during the past 12 fiscal years and is headed for a record surplus in the fiscal year that ended March 31 due to high oil price.
As a result, Kuwait, with a native population of just 1.2 million, has boosted its foreign assets at around $400 billion, according to the Institute of International Finance (IIF). But, development in the country has been hampered by continued political disputes. “We view the institutionalized impasse between the parliament and government as an impediment to policymaking,” said S&P.
“However, we believe that this risk is largely offset by the Kuwaiti population’s ability to express its views in a relatively free and open society, thereby reducing the risk of domestic conflict that has been seen elsewhere in the Middle East and North Africa region,” it said. S&P estimated that Kuwait’s budget surplus in the 2011/2012 fiscal year which ended on March 31 will be a massive 30 percent of gross domestic product.