Ahmed Hagagy

KUWAIT, Reuters – Kuwait’s government owes 2.35 Billion Dinars (7.78 billion USD) in late payments for public entities. This is a clear sign of the deepening cash crunch that the oil-exporting country has been facing since the outbreak of coronavirus.

In a Feb. 16 correspondence, seen by Reuters and responding to a parliamentary inquiry, the ministry said that late payments had been caused due to a lack of liquidity at the Treasury’s accounts.

The statement stated, “These payments are to be paid in stages when there is liquidity.” They amount to close to 11% in arrears of Kuwait’s annual budget, which begins April 1.

Al Qabas of the local newspaper first reported on this letter.

Although oil prices recovered in recent times have provided some relief, it has not been able to issue any international debt since 2017, when the Gulf nation’s public debt law was expired. Since then successive governments and cabinet members have failed to repeal it.

Since then, the government relies on other sources of financing such as asset swaps between their huge sovereign wealth fund or the Treasury. The government faces $3.5 million in payment on March 20, when 2017 international bonds mature. According to a February 10 statement, the finance ministry claimed that the extension of the bond’s maturity was not possible because it would result in a lower rating for Kuwait’s banks and sovereign credit, which could raise state funding costs.

Kuwait’s sovereign wealth Fund stated the same thing in the same document: despite the high oil prices, Kuwait still needs to have the debt law.

Kuwait Investment Authority declared that all “easy and possible solutions for increasing liquidity” have failed. They are calling for economic reforms as well as a law regarding withdrawals from Future Generations Reserve Fund. These measures will help preserve long-term oil wealth.

Five percent of late government payments comprise 1.29 billion dinars (for the finance ministry, public accounts) 8.622 million dinars of this amount are due to independent and public entities. These include those that provide social security and housing payments.

Fitch Ratings had downgraded Kuwait to an AA- rating last month. They cited “ongoing political constraints”, which hinder Kuwait’s ability solve structural problems.

($1 = 0.3021 Kuwaiti dinars)