Kuwait, one of the world’s leading oil-producing nations, successfully secured $11.25 billion through a three-part bond issuance, marking its return to global debt markets with significant investor interest since its last US dollar bond in 2017. This move comes amidst a backdrop of years marked by domestic political standstill.
The Gulf country joins other regional sovereigns in leveraging the bond market, as robust international demand and favorable borrowing conditions enable governments to explore various funding avenues to address budget shortfalls and invest in economic diversification initiatives.
Kuwait issued $3.25 billion in a three-year bond at 40 basis points above US Treasuries, $3 billion in a five-year tranche also at 40 basis points, and $5 billion in a ten-year part at 50 basis points over the same benchmark.
According to fixed-income news service IFR, initial demand exceeded $23 billion at launch, which allowed for a reduction in pricing from initial guidance.
Despite concerns regarding Kuwait’s governance, financial health, reliance on oil, and a limited non-oil sector, its relatively low existing debt levels provided comfort to investors, noted Justin Alexander, director at Khalij Economics and Gulf analyst at GlobalSource Partners.
Kuwait is estimated to have sovereign wealth assets exceeding $1 trillion, although precise figures remain undisclosed.
A new public debt law was enacted in March, following the expiration of the previous legislation years earlier. This new law raised the borrowing limit to 30 billion dinars ($98.24 billion) from the former 10 billion dinars and permitted longer borrowing terms.
The reform, like many others, faced years of stagnation due to ongoing tensions between the appointed government and Kuwait’s elected parliament. Last year, the emir dissolved parliament for a maximum of four years, which facilitated the government in advancing reforms.
Even with intentions to shift revenue sources beyond hydrocarbons, oil revenues constituted nearly 90% of government income in the most recent fiscal year.