Fitch IBCA rating agency on Thursday, August 17, affirmed its stable outlook rating for Kuwait on the back of high crude prices and the emirate's considerable returns from its extensive foreign assets. The London-based ratings agency also affirmed short- and long-term foreign currency ratings for Kuwait at "F1" and "A" respectively.
Fitch's top short-term currency rating is "F1," while its best long-term currency rating is "AAA."
"The Kuwaiti economy is benefiting from high world (oil) prices and the July increase in its OPEC quota to 2.037 million barrels per day. The current account surplus is forecast to double in 2000," the agency said in a statement.
The agency noted that such dependence on a single commodity could have negative implications for ratings, given the sharp swings in prices.
"However, Kuwait has a long history of investing oil revenue in overseas assets... Fitch estimates the government's external holdings to be in excess of $100 billion," the agency said.
Kuwait's foreign assets are estimated at $60 billion, down from more than $100 billion before Iraq's invasion of 1990.
But several other government and semi-governmental institutions also have their own foreign investments, including some $12 billion belonging to Kuwait Petroleum Corporation (KPC), the emirate's oil conglomerate.
"The income generated by overseas assets is considerable, providing an important supplement when oil prices fall," Fitch said. Income from foreign assets last fiscal year which ended June 30, was estimated at $3 billion.
Moody's Investors Service last November upgraded its outlook for Kuwait's rating to positive. Its outlook or Kuwait's rating was previously stable.
Economic reports estimated the surplus boasted by Kuwait during the 1999/2000 financial year to be in excess of KD one billion ($3.3 billion), the largest in 15 years.
Kuwait's budget deficit for the shortened 2000-2001 financial year, which began in July and ends in March, is estimated at five billion dollars.
Oil revenues, which account for more than 85 percent of the emirate's income, were calculated on the basis of a conservative price of $13 per barrel. Kuwaiti crude is currently trading at around $25 a barrel. — (AFP)
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