Moody's Downgraded Kuwait's Rating By Two Notches, To "A1" From "Aa2"
International rating Agency Moody's downgraded the long-term foreign and national currency Issuer rating of Kuwait to "A1" from "Aa2," the rating outlook is stable, the agency said in a statement.
"The decision to downgrade the rating reflects both the growing risks to the state's liquidity and the deterioration in the assessment of institutions and the effectiveness of Kuwait's governance," the report said.
Moody's believes that due to the lack of approval for the issuance of government debt or the use of assets of the country's sovereign wealth Fund, Kuwait's available liquid resources are close to depletion, which creates liquidity risk, despite the exceptional stability of the Kuwaiti budget.
Kuwait has one of the world's largest reserves of sovereign financial assets, both in absolute terms and concerning the size of the economy and public debt. "Providing predictable access to these funds will eliminate the risk to liquidity," the agency's experts believe.
"Since liquidity risks are particularly relevant in the short term, the probability of an increase and decrease (rating) in the medium term is generally balanced, which is reflected in the stable outlook," the agency concludes.