Kuwait’s New Debt Era: How Sovereign Borrowing Is Reshaping Fiscal Policy, Banking Liquidity and Kuwait’s Capital Market

Report summary

Kuwait's return to sovereign borrowing is not primarily a response to weak solvency. It is a change in fiscal funding architecture. After years in which deficits were absorbed largely through the General Reserve Fund, the 2025 Financing and Liquidity Law has given the Treasury three funding channels: a recurring domestic sovereign curve, access to international bond markets and, following the September 2026 amendment, a regulated ability to borrow from the Future Generations Fund. The timing is consequential. FY2025/26 closed with an actual deficit of KD 7.14 billion as revenue fell 25.4 percent to KD 16.457 billion and oil revenue fell 29.8 percent to KD 13.589 billion; expenditure rose 2.1 percent to KD 23.598 billion, and the Cabinet said the entire shortfall would be covered from the GRF. Meanwhile domestic public-debt instruments and tawarruq reached KD 3.7 billion by end-July 2026, more than four times a year earlier, and international issuance since the 2025 law totals $19.4 billion across the October 2025 $11.25 billion benchmark, the March 2026 $2.15 billion private placement and the July 2026 $6 billion sale. On an Edge working-stock basis the two books are roughly KD 9.7 billion, about one-third of the KD 30 billion statutory ceiling. The five-year domestic cut-off has fallen 150 basis points year on year, from 4.875 percent in August 2025 to 3.375 percent on 19 August 2026, while the discount rate moved only 50 basis points.