Kuwait’s election results are “a clear repudiation of the government’s austerity measures”, says credit ratings agency Moody’s.

The outcome of the elections, where opposition groups won half the contested seats is seen as “credit negative” as the new parliament is likely to hamper the government’s willingness to implement fiscal and economic reforms and reduce Kuwait’s dependence on oil.

The New York-headquartered firm has given Kuwait an AA2 investment rating with a negative outlook.

Kuwait is the most dependent on oil revenues within the GCC and has been the most reluctant to implement fiscal reform.

The government’s measures to increase the price of fuel in September 2016 was contested by the parliament, which in turn was dissolved through an emiri decree the following month.

Moody’s had earlier lauded the Kuwaiti government’s efforts at subsidy reform, terming it “credit positive” for the economy, saying the measures would lower the country’s current expenditures and bolster finances.

The ratings agency estimated that should Kuwait continue to spend at current levels – 55 per cent of gross domestic product (GDP) from 2016 onwards with no changes to base case assumptions of oil price, production growth, inflation and funding mix, then the country’s fiscal deficit is likely to average three per cent between 2016 and 2020. Government debt would also increase to around 54 per cent of the GDP by 2020, from 11 per cent in 2015.

Kuwait currently has the lowest fiscal and external break-even prices for oil in the GCC estimated at $47.8 and $40.1 respectively, according to the International Monetary Fund.

Moody’s estimates that the government had financial assets of nearly $600 billion, amounting to 530 per cent of GDP in 2015.