Large financial buffers help Kuwait overcome low oil prices

18 January 2017

IMF says economy is well placed to mitigate challenges

The Washington-based IMF said that Kuwait’s economy is well positioned to mitigate the impact of lower oil prices as it concluded the Article IV consultation with Kuwait in early January.

The IMF did warn that Kuwait’s fiscal and external positions have deteriorated and non-hydrocarbon growth has moderated—from 5 per cent in 2014 to about 3.25 percent in 2016 as a result of lower oil prices.

Kuwait is able to mitigate these challenges because it has large financial buffers and low levels of debt which allow it to implement economic reforms, such as removing subsidies and introducing value-added tax, gradually while simultaneously increasing public investment to support growth.

The IMF expects Kuwait’s fiscal and external positions to improve as oil prices recover, and non-oil GDP growth is expected to accelerate to 4 per cent over the medium term support by the governments five-year Development Plan.

In mid-January, Kuwait was reported to be meeting with bankers to finalise the plans for its dollar-denominated debut bond sale to help it shore-up cash in the wake of dwindling oil revenues.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications