Fitch Says Kuwait’s New Fund Borrowing Law Opens About 57 Percent of GDP in Financing Room
Kuwait’s amended Future Generations Fund law, in force since 1 September, lets the government borrow from the sovereign wealth fund to support the General Reserve Fund, and Fitch Ratings said on 17 September that the change strengthens the state’s financing flexibility. Outstanding borrowing is capped at 10 percent of the fund’s audited net asset value, a ceiling the agency puts at about 57 percent of gross domestic product on its 2026 estimates.
Two caps, one of them annual
The law sets a yearly limit as well as a stock limit. In any fiscal year the government may borrow up to 100 percent of the fund’s average realised returns over the previous 5 audited years, excluding principal. Neither the fund’s returns nor its net asset value is officially disclosed, and both funds are managed by the Kuwait Investment Authority. On our calculation, the agency’s estimate of a borrowing ceiling worth about 57 percent of output implies a fund worth roughly 570 percent of GDP, which sits alongside its forecast of sovereign net foreign assets at 668 percent of GDP this year, more than 10 times the median for AA rated sovereigns.
Fitch affirmed Kuwait at AA minus with a stable outlook on 7 August and describes the fiscal and external balance sheets as exceptionally strong. It counts the fund as part of government, so borrowing between the two funds is intra-governmental and does not enter its measure of public debt.
| Financing source | Size | Basis |
|---|---|---|
| Borrowing from the fund | About 57% of GDP | 10% of audited net asset value |
| Debt issuance law | About 60% of GDP | 30 billion dinars, over 50 years |
| Reserve fund drawdowns | 14% of GDP a year | Agency estimate, FY26 and FY27 |
The issuance authority dates from March 2025 and runs over 50 years, so it is not a stock comparable to the fund ceiling. A sukuk law has also been passed and is not yet in effect.
The debt path, before the change
Government debt has moved quickly. It rose to 15 percent of GDP in the fiscal year to March 2026 from 3 percent the year before, a jump of 12 points on our calculation, as spending stayed high and oil revenue fell. At its August review the agency projected 29 percent this year and 34 percent next, with a deficit excluding investment income of 19 percent of GDP in the current year. More borrowing from the fund would slow that accumulation, and the agency expects debt to stay well below the median of about 51 percent it projects for AA rated sovereigns in 2026.
| Measure | Share of GDP |
|---|---|
| Government debt, FY24 | 3% |
| Government debt, FY25 | 15% |
| Government debt, FY26 forecast | 29% |
| Government debt, FY27 forecast | 34% |
Fiscal years end in March. The FY26 and FY27 figures are agency projections made at the August review, before the law changed.
Where the spending sits
The agency put total spending at about 49 percent of GDP in the last fiscal year, with public sector wages and subsidies accounting for 81 percent of it and 40 percent of GDP. On our calculation that leaves about 9 percent of GDP for everything else the state does. It said progress on the GCC wide value added tax remains slow and that easier access to fund borrowing could weaken the incentive to adjust.
Why it matters: Kuwait now has 3 financing routes: the debt market under the 2025 issuance law, drawdowns from the General Reserve Fund, and lending from the Future Generations Fund. The third is the new one, and it is borrowing that the agency nevertheless leaves out of public debt, because it counts the fund as part of government. On our reading that is what lets a deficit of 19 percent of GDP be covered with a smaller addition to the debt ratio than market issuance alone would imply.
Outlook: The agency said it will update its forecasts for reserve fund drawdowns and government debt later in September in its quarterly Sovereign Data Comparator. It also said the safeguards in the amended law are substantially less restrictive than the previous framework, which required parliamentary approval.
Sources: Fitch Ratings.
