From 2017 until mid-2024, Kuwait’s government was unable to issue any sovereign debt in the form of sukuk (Islamic bonds) or bonds due to a continuing political roadblock. This had prevented the enactment of a public debt law authorising such issuances. The country was in the unusual position of having extensive fiscal reserves – for example, its sovereign wealth fund, the estimated $1trn Kuwait Investment Authority (KIA) is one of the world’s largest – while being unable to leverage them to finance government development projects or day-to-day expenditure. In May 2024, however, the obstacle was overcome with the four-year suspension of Parliament by the Emir. A draft of a new public debt law was then approved by an Emiri decree in March 2025, enabling the KIA to borrow internationally and the Central Bank of Kuwait to borrow domestically via the issuance of sovereign bonds and sukuk.
Fiscal Discipline
The new law allows the government to issue KD30bn ($97.7bn) in bonds over a 50-year period. In order to maintain fiscal discipline, this will be within a framework that limits the debt-to-GDP ratio to 60%. This is well above projections, however, with credit ratings agency Fitch estimating that under the new law, the debt-to-GDP level will rise from 2.9% in FY 2024/25 to 9.2% in FY 2026/27. After a period of preparation, the first issuance since 2017 went ahead in October 2025. This involved $11.3bn in bonds spread between three tranches: a $3.3bn issue of three-year bonds, a $3bn issue of five-year bonds and a $5bn issue of 10-year bonds. The issuance was among the largest of the year globally, led by a consortium of international finance entities including Citi, HSBC, JPMorganChase, Goldman Sachs and Mizuho Financial Group.
The bonds were highly sought after, given the country’s low debt issuance history, stable economic fundamentals and the backing of the KIA, which acts as a financial buffer for any issuances. The October 2025 transaction was 2.5 times oversubscribed, attracting offers from around the globe. Indeed, over two-thirds of allocations went outside of the MENA region. Meanwhile, Boursa Kuwait has been preparing to list exchange-traded funds, bonds and sukuk, with Mohammad Saud Al Osaimi, CEO of Boursa Kuwait, announcing in July 2025 that technical tests for the fixed income market were completed and additional regulatory rules were being prepared.
Diversification
An Emiri decree has boosted investor confidence that other long-delayed laws may also be passed. This includes a residential mortgage law that would enable Kuwait’s banks to offer mortgage loans for the first time. These could be up to KD200,000 ($651,000) in value, with up to 25-year tenors, stimulating banking, financial services, home insurance, construction and real estate. Discussion of reforms on foreign property ownership indicates potential expansion in the real estate sector.
The government has been working on diversifying its sources of revenue, such as the new 15% minimum top-up tax on international companies, which came into effect on January 1, 2025 and collections set to begin in 2027. This diversification should create greater financial security for the government, backing up its issuance of debt and ability in order to finance more development projects. Taken together, these moves are set to have a major positive impact on the economy and Kuwait’s capital market.
The year 2026 should see more project rollouts financed by sukuk and bonds, with these appearing on the local market, setting the scene for dynamism in the local fixed income segment. With the Capital Markets Authority and Boursa Kuwait continuing with their market development plans, a wider range of products should emerge, including more funds. Higher sophistication and demand, backed by solid financials, should position Kuwait with a high-performing capital market in the medium to long term.
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