Kuwait Adds Sukuk to Its Borrowing Tools Next to a 30 Billion Dinar Debt Ceiling
Kuwait has widened the tools it can use to fund its budget. A package of six laws and draft decree-laws, approved in recent months, lets the government issue sukuk alongside conventional debt instruments. It also lets the state borrow from the Future Generations Reserve, using its realised returns on a repayable basis, while preserving that fund’s capital. The package sits alongside the Financing and Liquidity Law, which permits up to 30 billion dinars of domestic and international debt issuance, equivalent to 97.4 billion dollars on our calculation at the midpoint of the Central Bank of Kuwait’s 8 October quote of 0.30810 to 0.30820 dinars per dollar. KUNA, which set out the package on 9 October, said the six laws support Kuwait Vision 2035.
The two financing measures are a third of the package. The other four deal with disputes, the courts and company rules: an arbitration decree-law and an amendment to the Companies Law, both drafts approved by the Cabinet, plus the Economic Circuits Law and a decree-law against commercial concealment, both issued in August. They arrive in the year the state budget raised capital spending to 3.069 billion dinars.
Six measures, three jobs
The first job is funding. Law No. 90 of 2026 allows sukuk to be issued against existing government assets, operating rights attached to those assets, or assets to be provided in future. The law’s explanatory memorandum adds that sukuk will provide a tool to refinance existing debt in line with the government’s financing plan, which makes the instrument a refinancing tool as well as a new source of cash. The Ministry of Finance said it would take an institutional approach to issuance aimed at a regular presence in domestic and international markets. Decree-Law No. 81 of 2026 opens the second channel: the State’s General Reserve may borrow from the Future Generations Reserve, using realised returns on a repayable basis, while the reserve’s capital is preserved.
The second job is legal certainty. The arbitration draft decree-law, approved by the Cabinet in mid-September, would draw on the Model Law on International Commercial Arbitration and allow electronic procedures, hearings and document exchange. The Economic Circuits Law, issued in August, establishes specialised circuits at the Court of First Instance, the Court of Appeal and the Court of Cassation.
The third job is market entry and fair competition. Decree-Law No. 78 of 2026, issued in August and running to 14 articles, prohibits the use of another party’s trade name or licence and allows reconciliation without custodial penalties. The draft decree-law amending Companies Law No. 1 of 2016, approved by the Cabinet in late September, would remove the notarisation requirement, make registration in the Commercial Register count as notarisation, allow one-person professional companies and give existing firms one year to regularise their status.
A wider toolkit, priced lower
The bond record shows the cost of borrowing has already come down. The domestic public debt schedule, dated 8 October, lists 28 long-term bond and tawarruq issues outstanding. On our calculation they total 3.9 billion dinars; the schedule lists domestic issues only, one of them dating from 2017.
Kuwait’s Domestic Issuance: Lower Coupons in 2026/27
| Measure | 2026/27 to date | 2025 issues |
|---|---|---|
| Issues | 13 | 12 |
| Amount (KD million) | 1,850.0 | 1,700.0 |
| Bids (KD million) | 6,021.7 | 17,711.5 |
| Bid-to-cover | 3.3x | 10.4x |
| Weighted coupon | 3.00% | 4.66% |
Long-term bonds and related tawarruq outstanding on the Central Bank of Kuwait public debt schedule as of 8 October 2026. “2026/27 to date” covers issues dated from 1 April to 23 September 2026; “2025 issues” covers those dated 2 July to 17 December 2025. Bid-to-cover and volume-weighted coupons are our calculation.
On our calculation, the 13 issues sold since the fiscal year began on 1 April raised 1.85 billion dinars, or 47.4 percent of everything outstanding on the schedule, at a volume-weighted coupon of 3.00 percent, which is 1.66 percentage points below the 4.66 percent paid on the 12 issues sold in 2025 and 0.5 percentage point below the 3.50 percent discount rate. The like-for-like gap shows at seven years: the 23 September issue priced at 3.625 percent, against 4.875 to 5.125 percent on the three seven-year issues of September and October 2025, a gap of 1.25 to 1.5 points on our calculation. Bids covered the fiscal-year issues 3.3 times in total, and no single issue drew less than 2.8 times its size, on the same calculation. The 2025 issues drew 10.4 times cover, at much higher coupons.
The budget the laws are built to fund
The 2026/27 budget, approved by the Cabinet and published in February, sets revenue at 16.313 billion dinars and spending at 26.068 billion, for a deficit of 9.756 billion.
Kuwait’s 2026/27 Budget Lifts Capital Spending 72.4 Percent Above the 2025/26 Outturn
| Item (KD million) | Budget 2026/27 | Actual 2025/26 | Actual 2024/25 |
|---|---|---|---|
| Non-oil revenue | 3,500.0 | 2,868 | 2,699 |
| Total revenue | 16,312.8 | 16,457 | 22,057 |
| Capital spending | 3,069.1 | 1,780 | 1,519 |
| Total spending | 26,068.4 | 23,598 | 23,113 |
| Fiscal balance | -9,755.6 | -7,141 | -1,056 |
Fiscal years run from 1 April to 31 March. Budget figures from the Ministry of Finance budget presentation for 2026/27 (February 2026); actuals from its closing accounts summary for 2025/26, published 7 July 2026, which also carries the 2024/25 column.
Capital spending is the part of the budget the project list depends on. At 3.069 billion dinars it is 72.4 percent above what was actually spent in 2025/26 and more than double the 2024/25 outturn, on our calculation, and it takes 11.8 percent of total spending. Last year’s capital outturn was itself 17.2 percent above 2024/25, and reached 79.4 percent of its budget, on our calculation. The budget carries 433 ongoing and 101 new projects, plus 122 at affiliated public authorities, 15 of them new. That is 656 projects in all, of which 116, or 17.7 percent, are new on our calculation.
Non-oil revenue is budgeted at 3.5 billion dinars, 22.0 percent above the 2025/26 outturn on our calculation, lifting its share of revenue to 21.5 percent from 17.4 percent. Salaries and subsidies take 76.1 percent of spending, on our calculation. The budget assumes oil at 57 dollars a barrel and output of 2.6 million barrels a day, against a break-even price of 90.5 dollars, a gap of 33.5 dollars on our calculation. The 2025/26 outturn closed with a deficit of 7.141 billion dinars, 834 million wider than budgeted on our calculation, with oil revenue at 13.589 billion against 15.305 billion planned.
Why it matters: Every issue on the domestic schedule today pairs a bond with a related tawarruq. Sukuk add a second instrument, issued against government assets, that can also refinance existing debt under the government’s financing plan, while the reserve-returns decree lets the State’s General Reserve borrow on a repayable basis and leaves the Future Generations Reserve’s capital intact. Coupons on this fiscal year’s issues are 1.66 percentage points lower than on the 2025 issues, on our calculation, which lowers the cost of borrowing within the 30 billion dinar ceiling. The court, arbitration, concealment and companies measures address how disputes are settled and how companies are formed and run.
Outlook: The arbitration and Companies Law texts are Cabinet-approved drafts, and their issuance as decree-laws is the next step to watch. The first sukuk under Law No. 90 will show how the institutional approach translates into size and pricing against conventional paper at 3.625 percent for seven years. The closing accounts for 2026/27 will then show how much of the 3.069 billion dinar capital budget reached the 656 projects on the list.
Sources: KUNA, Kuwait Ministry of Finance, Central Bank of Kuwait, The Edge.
