Kuwait’s Five-Year Borrowing Cost Has Fallen 150 Basis Points in a Year While Policy Rates Fell 50
The Central Bank of Kuwait sold 100 million dinars of five-year paper on 19 August at a uniform yield of 3.3750 percent. Three weeks earlier, on 29 July, it sold 250 million dinars of the same tenor at 3.2500 percent. On the surface that is a 12.5 basis point step up in the sovereign’s five-year cost of funds.
Set against twelve months, the direction is the opposite one. Five-year paper priced at 4.8750 percent in August 2025, 4.6250 percent that September, 3.6250 percent in February 2026, and 3.2500 percent in April, June and July. From August 2025 to August 2026 the five-year yield has fallen 150 basis points exactly.
Over the same period the Central Bank’s discount rate fell 50 basis points, from 4.00 percent to 3.50 percent, where it has stood since 11 December 2025. The sovereign’s borrowing cost fell three times as far as the policy rate that anchors it.
The money market
The Central Bank’s indicators page, updated at 09:07 on 20 August, puts the Kuwait Overnight Interest Average at 2.890 percent for value date 19 August, on turnover of 476.001 million dinars.
That print sits 23.5 basis points below the Central Bank’s own overnight repo rate of 3.125 percent and 61 basis points below the 3.50 percent discount rate. An unsecured overnight average clearing below the central bank’s overnight facility, on turnover of that size in a single session, is consistent with ample short-term dinar liquidity in the banking system.
The term structure slopes up from there. Kuwait interbank offered rates for value date 24 August run 2.5000 percent overnight, 3.2500 percent at one week, 3.3750 percent at one month, 3.5625 percent at three months, 3.7500 percent at six months and 3.9375 percent at one year. The dinar was quoted at 0.30670 to 0.30680 against the dollar at 08:00 on 20 August.
The issuance programme is running at scale
Adding the Central Bank’s outstanding-issues table for the financial year that began in April gives 1.750 billion dinars raised across twelve issues in four and a half months — 200 million and 200 million at two and three years on 22 April, 100 million at five years on 29 April, 50 million at seven years on 13 May, 150 million at three years on 20 May, four issues totalling 550 million on 24 June, 150 million at three years on 22 July, 250 million at five years on 29 July, and 100 million at five years on 19 August.
Extending the same table back to the earliest row of the current programme, dated 2 July 2025, gives at least 3.750 billion dinars across 26 issues to 19 August 2026. A figure of 4.250 billion has circulated for the period since the financing and liquidity law programme began in June 2025; the Central Bank’s outstanding table does not carry the June 2025 issues, so that larger number cannot be verified from CBK’s own published data and is not used here.
A note of care on the liquidity reading
The banking aggregates complicate any simple story about idle deposits. At end-June, broad money was 42.74 billion dinars, up 1.7 percent year on year. Total private sector deposits rose 1.6 percent. Narrow money contracted 1.3 percent to 11.01 billion. Against that, total utilised cash credit facilities rose 5.9 percent to 54.75 billion dinars on the Central Bank’s summary of key monetary and banking indicators, and local banks’ total assets rose 7.2 percent to 104.31 billion. Note that CBK’s Table 17, which covers dinar-denominated facilities only, gives a lower figure on a narrower definition.
Credit is growing at roughly three and a half times the pace of deposits and bank assets at four and a half times. That is a banking system deploying capacity, not one sitting on unused funds. The clearer evidence for comfortable absorption of state borrowing is therefore in the prices rather than the stocks: an overnight rate below the central bank’s own facility, and a five-year yield down 150 basis points across a year in which the sovereign kept coming to market.
Sources
- Central Bank of Kuwait, Main Indicators, updated 20 August 2026
- Central Bank of Kuwait, Public Debt Instruments, outstanding as of 19 August 2026
- Central Bank of Kuwait, Monthly Monetary Statistical Bulletin, June 2026
- Central Bank of Kuwait, Summary of the Key Local Monetary and Banking Indicators, June 2026
