Fitch Ratings affirmed Kuwait at AA-
with a stable outlook, citing exceptionally strong external assets and sovereign net foreign assets reaching 668% of GDP in 2026. The rating agency warned that ongoing regional instability, attacks from Iran, and Strait of Hormuz oil export disruptions will widen the budget deficit.
Fitch Ratings has affirmed Kuwait’s Long-Term Issuer Default Ratings at AA-
with a Stable Outlook, anchoring the credit assessment on the nation’s robust financial buffers even as regional conflict weighs on economic activity and oil output. The Central Bank of Kuwait confirmed the rating action in a statement to KUNA, noting that the country’s sovereign position rests on exceptional external strength.
Regional Conflict and Strait of Hormuz Pressures on Oil Production
Geopolitical tensions remain a primary headwind for the sovereign’s creditworthiness. Following the collapse of a ceasefire in mid-July 2026 after an interim deal signed in mid-June, the ongoing conflict involving Iran continues to affect strategic infrastructure and transit conditions. Because Kuwait relies heavily on the Strait of Hormuz to export crude, persistent disruptions have severely dented production levels.
Crude production dropped sharply to 0.78 million barrels per day during March through May 2026 before rebounding to 1.65 million barrels per day in June and approximately 2 million barrels per day in July. Fitch projects that overall crude production will average 2 million barrels per day for the fiscal year ending March 2027, before recovering further in the subsequent fiscal period. The rating agency highlighted that although certain oil facilities sustained damage, the country maintains the operational capacity to restore production quickly once transit normalization returns.
“Some oil facilities have been damaged, but we believe Kuwait has the capacity to restore production quickly once transit conditions normalise.”
Fitch Ratings
Fiscal Deficit Projections and Public Debt Trajectory
War-related revenue pressures and an ongoing infrastructure drive are set to expand the government’s financial shortfall. Under government reporting conventions that exclude investment income from the Kuwait Investment Authority, the reported budget deficit is expected to widen by 4 percentage points to reach approximately 19% of GDP for the fiscal year ending March 2027. Current spending remains rigid, driven primarily by public sector salaries and subsidies, which accounted for 81% of spending and 40% of GDP in the fiscal year ended March 2026.
To finance the anticipated shortfall, the government is expected to rely mostly on debt issuance alongside drawdowns from the General Reserve Fund. Consequently, government debt is projected to climb from 2.9% of GDP in the fiscal year ended March 2025 to 38% by the fiscal year ending March 2029. Even with this projected increase, public debt will remain well below the median of peer countries with an AA
sovereign rating, which is forecast at around 51.5% of GDP for 2028.
Exceptionally Strong External Balance Sheets and Asset Buffers
Kuwait’s credit profile continues to draw primary support from its massive external asset position. Sovereign net foreign assets relative to GDP remain the highest among all sovereigns rated by Fitch, with the bulk of these funds held in the Future Generations Fund managed by the Kuwait Investment Authority.
| Financial Metric | Projected Figure / Status |
|---|---|
| Sovereign Net Foreign Assets | 668% of GDP in 2026 (up from 652% in 2025) |
| Average Oil Price (FY26) | $81.40 per barrel |
| Fiscal Break-Even Oil Price | Over $100 per barrel in FY26 (excluding investment income) |
| Projected Government Debt (FY29) | 38% of GDP |
Fitch forecasts that sovereign net foreign assets will climb to 668% of GDP in 2026, rising from an estimated 652% in 2025 and standing at more than 10 times the median for AA
-rated peers. When incorporating estimated investment income from the Kuwait Investment Authority—figures not officially disclosed in standard state accounts—the agency projects an overall fiscal surplus of 1.7% of GDP for fiscal 2026, improving from 0.3% the previous year.
Economic Growth, Inflation, and Structural Constraints
Weaker oil output is expected to contract overall economic activity, while non-oil GDP maintains positive yet subdued growth. Public infrastructure spending, public sector employment, and central bank support for the domestic banking sector provide foundational backing for non-oil activity. Inflation is anticipated to record a marginal increase through 2026 before easing in 2027.
Despite strong financial assets, structural credit constraints persist. Kuwait faces heavy dependence on hydrocarbon revenues, a costly welfare structure, and governance indicators that lag behind peer economies. Non-oil revenue averaged 9.1% of non-oil GDP between fiscal years 2022 and 2025, sitting below the Gulf Cooperation Council median of 10.3%. Although budget plans target non-oil revenue improvements through fee increases, digitization, and a newly introduced 15% domestic minimum top-up tax on multinationals, collection shortfalls are anticipated as regional conflict dampens broader economic momentum.
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