Kuwait is continuing its efforts to transform the economy and diversify away from hydrocarbons. Guided by its ambitious long-term policy blueprint, New Kuwait 2035, the country’s efforts are centred on boosting private sector participation, digitalising key aspects of the economy and rolling out major new infrastructure investment. With renewed momentum under Emir Sheikh Mishal Al Ahmad Al Jaber Al Sabah, Kuwait is implementing broad-based governance, judicial and economic reforms that are designed to improve efficiency, attract foreign capital and strengthen the foundations for sustainable and innovation-led long-term growth. A major milestone was reached in 2025 with the passage of a new debt law that widens the financing options available to the government as it advances towards the goals laid out in New Kuwait 2035.
Structure & Oversight
Kuwait’s economy is guided and led by three key government ministries: the Ministry of Finance, the Ministry of Foreign Affairs and the Ministry of Interior, which are headed up by Minister Yaacoub Al Refaie, Minister Sheikh Jarrah Jaber Al Ahmad Al Sabah and Minister Sheikh Fahad Yousef Saud Al Sabah, respectively. Together, these ministries guide policy formation around key areas including fiscal law, immigration and long-term economic policy. Given the important role that the hydrocarbon sector plays, the Ministry of Oil under the leadership of Tareq Al Roumi is also a key player and oversees all aspects of industrial policy and development.
The Kuwait Direct Investment Promotion Authority (KDIPA) was established in 2013 and is tasked with promoting foreign direct investment (FDI) into the country. Operating as part of the Ministry of Finance, the KDIPA fulfils four core roles: development, promotion, regulation and advocacy. Across these areas it is responsible for promoting economic diversification and job creation, encouraging value-added and innovation-based FDI into the country, planning and establishing special economic zones, handling investment applications and licensing, extending incentives and exemptions to potential and existing investors, and coordinating the efforts with relevant government bodies, as well as engaging with the private sector in identifying and eliminating potential barriers to investment.
The Kuwait Investment Authority (KIA) is the country’s sovereign wealth fund (SWF) and the world’s oldest SWF, tracing its origins back to 1953. Originally established as the Kuwait Investment Board it changed to the Kuwait Investment Office (KIO) in 1965 before the KIA was created in 1982 to act as the KIO’s parent organisation. The KIA also oversees the management and administration of Kuwait’s main funds: the General Reserve Fund (GRF) and the Future Generations Fund (FGF). The former is the repository of all of Kuwait’s oil revenue and income earned from GRF investment. It acts as a government investment arm, investing in domestic and regional companies with holdings in public enterprises and international organisations. Meanwhile, the FGF was conceived as the country’s intergenerational savings platform and established by royal decree in 1976. It was set up with 50% of the GRF balance and topped up yearly with a minimum of 10% of the government’s annual revenue.
Growth Strategy
Economic trajectory is guided by New Kuwait 2035, launched in 2017. The plan seeks to diversify the national economy away from hydrocarbons, building a robust non-oil sector based on modern infrastructure, an efficient civil service, a sustainable living environment, high-quality health care and creative human capital. In 2023 an updated four-year economic plan under New Kuwait 2035 was unveiled, with a renewed focus on private sector, technology-driven growth, FDI and a reduction in government spending. Major infrastructure projects associated with New Kuwait 2035 are under way or in advanced stages, including investment in airport, road and railway development. Moving forwards, new financing initiatives are being explored to support big projects across both the transport and energy sectors and to fuel the growth of smart cities and industrial zones. The aim is to reduce public spending in these areas by 30% and attract up to KD10bn ($32.6bn) in private and foreign investment, thereby generating KD1bn ($3.3bn) in annual revenue by 2030 and creating more than 50,000 jobs in the process.
A major manufacturing milestone was reached in February 2024 as the Al Zour refinery and petrochemicals complex started operating at full capacity of 615,000 barrels per day (bpd), making it the largest operating refinery in the Middle East and the second-largest in the GCC (see Energy chapter). Elsewhere, regulatory reforms associated with New Kuwait 2035 are ongoing across the economy, including the introduction of a real estate brokerage system, smart licensing project, amendments to the Companies Law, a taxation framework for multinational groups and the launch of a real estate developer system. Health care, another big focus of New Kuwait 2035, has also experienced significant growth in recent years, with health care spending accounting for 5.1% of GDP in 2023 – the second-highest figure in the GCC – and making up 11% of the government’s FY 2024/25 budget.
Substantial investment in health care infrastructure is ongoing, with $608m allocated to build and expand 10 hospitals through 2030, as well as investment in services and workforce development. Alongside this medium-term investment, there are initiatives to boost digital health solutions and position the country as a major centre for innovative research and development, with $56m earmarked for digital transformation initiatives in the health care sector over the near to medium term.
Performance
Members of the Organisation of the Petroleum Exporting Countries (OPEC) and other allied oil-producing nations, collectively known as OPEC+, initiated production cuts in late 2022 and extended them until November 2025. Since then, OPEC+ agreed to a small output increase in December 2025 and a pause in production increases in the first quarter of 2026. The result of the sustained production cuts was a 6.9% drop in Kuwait’s oil sector output and real GDP, the latter of which contracted by 2.6% in 2024. However, the non-oil sector is leading the economic recovery with expected growth of 2.5% in 2025, and inflation has begun to moderate after the inflationary pressures of the post-pandemic period. In July 2025 the IMF had projected a return to growth with the economy set to expand by 1.9% for the year, buoyed by positive non-hydrocarbons activity as well as increased oil production. In September 2025, however, the IMF revised the country’s real GDP growth forecast to 2.6% following the decision of OPEC+ to relax cuts.
The oil and gas sector remains central to Kuwait’s economy and national output, with hydrocarbons receipts accounting for roughly 90% of government income in recent years. In FY 2024/25 hydrocarbons accounted for 43.9% of GDP and 87.8% of government revenue. This represents a drop in the share of GDP of hydrocarbons from the previous year when oil accounted for 47.1% of GDP. The sector’s performance is closely tied to OPEC+ actions and global oil prices with national growth patterns being closely correlated to volatile oil prices over the past decade.
Though modest, non-oil economic activity has continued to rise in recent years, expanding by 3.1% in 2024, with growth of 2.5% forecast for 2025 by the National Bank of Kuwait (NBK). Expansion is underpinned by government-led diversification efforts in line with New Kuwait 2035, which lists a sustainable and diversified economy among its key pillars. According to GDP data offered by the Central Statistical Bureau (CSB) from 2024, the top-five non-oil sectors in terms of GDP contribution were public administration and defence (12.1%), financial and insurance activities (9.3%), real estate activities (8%), manufacturing (8%), and transport, storage and communications (6.8%).
Inflation has moderated since a peak in 2022 in the wake of the Covid-19 pandemic, when it reached nearly 4%. In December 2025 year-on-year (y-oy) inflation was reported around 2.1% by the CSB, broadly in line with the 2.4% figure recorded for the previous two months. Price increases were most notable in the food and beverages segment, which saw an increase of 5.4%; miscellaneous goods and services segment (6.5%); furnishing and household maintenance (1.8%) and clothing (1.7%).
Reform Drive
Emir Sheikh Mishal acceded to the throne in December 2023 following the passing of his half brother, Sheikh Nawaf Al Ahmad Al Jaber Al Sabah. In the emir’s inaugural address before the National Assembly, he signalled the beginning of a transformative chapter for Kuwait, foreshadowing his ambitions to break a cycle of political inertia that has long gripped the legislature. Kuwait enjoys one of the most open political systems in the region, with an elected 50-member Parliament. The emir appoints a prime minister who, in turn, recommends a Council of Ministers, or Cabinet, 15 of whom sit in Parliament. However, political impasse has caused legislative bottlenecks in recent years, impacting efficiency and concerns over basic administration.
In May 2024 the emir dissolved Parliament – the ninth time it had been dissolved in four years – and launched a reform agenda under the auspices of New Kuwait 2035. His newly appointed Cabinet has launched a review of public services and existing legislation aimed at enhancing productivity, including the full digitalisation of public services. The plan includes six pillars: restructuring the government apparatus, building a digital society and reinforcing integrity, improving workplace environments across public institutions, investing in human capital, implementing development plans efficiently and achieving sustainable development goals.
Judiciary reform is a major focus of the emir’s modernisation agenda, specifically around efficiency, transparency, accountability and localisation. In July 2025 Minister of Justice Nasser Yousef Mohammed Al Sumait announced the launch of the largest legislative development plan in its history. He spoke of previous legislative renaissances as he explained that eight working committees had started reviewing major laws, including those governing economic courts, real estate rent and ownership, criminal procedures and labour, and major penal code reforms. Another focal point is the Kuwaitisation of the judiciary and addressing the case backlog and procedural delays that currently impact the system. The Institute for Judicial and Legal Studies was tasked with developing an electronic testing system for junior legal researcher positions, or a gateway for becoming public prosecutors. In 2025 the Kuwaitisation rate stood at 77%, with the plan to reach 85% in 2026, 90% by 2027 and full Kuwaitisation by 2030.
New Debt Law
A major fillip to the national economy came in September 2025 when the government sold nearly $11.3bn in bonds across three tranches on the international debt market. The issuance represents an important reform measure and Kuwait’s first foray into international debt markets in almost a decade. It was made possible by the passing of the government’s landmark debt law earlier in the year after the previous law had expired in 2017. The legislation, passed by decree in March 2025, allows the government to issue up to KD30bn ($97.7bn) in debt instruments, an increase from KD10bn ($32.6bn) on the previous law, either in local or foreign-denominated currency with maturities of up to 50 years, an extension over previous limits. This represents the longest-term legal framework that the country has ever established for managing debt instruments. The law is a component of the diversification agenda, providing an alternate means of funding high-cost infrastructure projects, financing the budget and achieving goals laid out in New Kuwait 2035.
In March 2025, ahead of the law being passed, Kuwait Petroleum Corporation’s Deputy Chairman and CEO Sheikh Nawaf Saud Al Sabah, said the country could not have a sustainable future if oil remained the dominant revenue stream and that the budget will have to find alternative revenue sources besides oil. He said that budget increases and population growth require more expenditure than oil revenue can provide. Investor confidence has been significantly buoyed by the new law. Financial and legislative reforms have played a decisive role in renewing investor confidence in 2025. The Kuwait Stock Exchange has also mirrored this sentiment, recorded a 61% increase in profit in the first half of 2025 compared to the same period in 2024.
The September debt issuance was structured in three tranches: a nearly $3.3bn three-year bond with a yield of 4%, a $3bn five-year bond yielding 4.1% and a $5bn 10-year bond with a yield of 4.7%. This is likely the first of several in FY 2025/26, during which the government is expected to borrow KD3bn ($9.8bn) to KD6bn ($19.5bn), according to Faisal Al Muzaini, the director of public debt management at the Ministry of Finance.
Budget
Government expenditure associated with the FY 2024/25 budget declined by nearly 7% compared to the previous fiscal year, with spending for FY 2024/25 coming in at KD23.1bn ($75.2bn), lower than the KD24.5bn ($79.8bn) initially forecast. As a result, Kuwait recorded an actual budget deficit of KD1.1bn ($3.5bn) that fiscal year, much lower than the projected shortfall of KD5.6bn ($18.2bn). The drop in expenses was partially attributed to reduced allocations for grants, including support for foreign countries, international organisations and some domestic institutions. There was also a spending reduction in goods and services, encompassing a wide range of government spending while oil revenue also played a large role, with total receipts for the fiscal year up slightly to $63.4bn from what was initially forecast at $61.9bn.
The FY 2025/26 budget, which was approved in February 2025, projects total revenue of KD18.2bn ($59.4bn) and an estimated spend of approximately KD24.5bn ($79.9bn), equating to a projected deficit of KD6.3bn ($20.5bn). Total revenue is based on an oil price of $68 per barrel and a production forecast of 2.5m bpd, in line with OPEC+ and the bloc’s consideration to increase production in 2026-27 to regain global market share.
Oil revenue accounts for KD15.3bn ($49.8bn) of total revenue outlined in the budget, or around 83.9%, with non-oil revenue accounting for KD2.9bn ($9.4bn), around 15.9%. Non-oil revenue has grown substantially, expanding at a rate of 9%. Within the non-oil segment, the FY 2025/26 budget estimates KD631.3m ($2.1bn) from taxes and fees, including KD26m ($84.7m) in property taxes, KD420.2m ($1.4bn) in trade and import duties, and KD361m ($1.2bn) in fines, penalties and confiscations.
General public services accounts for the most significant spending in terms of allocations for ministries and government departments, representing 29.6% of the total. Rounding out the top-five ministries for public spending are education (14.5%), economic affairs (11.5%), defence (10.2%) and health (10.1%). Expenditure will largely be concentrated on wages, government subsidies and public services, which will account for 79.5% of total financing according to the Ministry of Finance.
Capital expenditure, meanwhile, is estimated at 9.1%, with KD1.7bn ($5.5bn) earmarked for infrastructure and services projects, with a focus on rail, road, water and electricity proposals, as well as the ongoing construction of Mubarak Al Kabeer Port. Also included in this bracket are significant developments associated with New Kuwait 2035, and upgrades to Sabah Al Salem Stadium and Mohammed Al Hamad Stadium ahead of Kuwait’s bid to host football’s AFC Asian Cup in 2031.
Inflation
In September 2025 the Central Bank of Kuwait (CBK) decided to cut its discount rate by 25 basis points, from 4% to 3.75%. The CBK cited slower inflation – down from 3% in July 2024 to 2.4% in July 2025 – as well as the continued stability of the Kuwaiti dinar against major currencies as part of its rationale. The move follows the CBK’s decision in September 2024 to cut the discount rate by 25 basis points to 4%, with the bank again citing a moderating inflation rate and a desire to support credit expansion in the non-oil economy as motivation for the move.
Strong monetary and banking indicators also supported the decision, with the CBK reporting that deposits grew by 4.2% in 2024 and credit to residents increased by 3.2%. The CBK hopes the move will help maintain a balance between fostering sustainable growth across the economy and reinforcing the financial and monetary stability of the CBK-regulated units. It noted its prudent and data-driven approach to rate-cut decisions, considering developments in local and global economic, monetary and banking conditions, as well as key interest rate trends on major currencies. The 2025 rate cut comes shortly after the US Federal Reserve similarly cut rates and is part of a pattern of GCC central banks broadly following the Fed’s moves. Though shifts in the US rate exert a strong influence, given the Kuwaiti dinar is pegged to a basket of currencies rather than being strictly pegged to the dollar allows the CBK more flexibility and manoeuvrability when it comes to setting policy.
Foreign Trade
Kuwait ran a trade surplus of roughly KD11.6bn ($37.8bn) in 2024. Total exports stood at KD23.3bn ($75.9bn) and imports totalled approximately KD11.7bn ($38.1bn). Oil accounted for 90.6% of the country’s exports, according to the CSB, with non-oil exports rising by 17%, to KD1.3bn ($4.3bn) by the end of 2024, up from KD1.1bn ($3.6bn) during the previous year. The value of Kuwait’s re-exports also witnessed a significant jump in 2024, increasing by 47%.
In 2023 almost one-quarter of Kuwait’s exports went to China, with the world’s second-largest economy accounting for 24.6% of Kuwait’s export share. India and Japan followed with 13.4% and 12.9% of export share, respectively, while Taiwan and the UK rounded out the top-five countries with 6.7% of exports going to the former and 4.7% to the latter. As a bloc, the other GCC countries accounted for 8.8% of Kuwait’s exports, with the UAE being the top regional export destination (4.3%). China (17.4%), the UAE (10.6%), the US (8.8%), Saudi Arabia (5.9%) and Japan (5.7%) represented Kuwait’s top-five import markets in 2023, with industrial and consumer goods, machinery and food accounting for a significant share of imports.
As a member of the GCC, Kuwait negotiates collective international trade deals with the rest of the bloc. In May 2025 the GCC officially launched negotiations for a free trade agreement (FTA) with Malaysia. As such, Kuwait has no comprehensive bilateral FTAs outside of GCC arrangements. However, it does sign bilateral memoranda of understanding and investment treaties with other countries and Kuwait has signed bilateral investment treaties with 86 countries, 70 of which are in force as of end-2025.
The Kuwait Free Trade Zone is situated at the Shuwaikh Port, the country’s main shipping facility. The port, which has 21 berths with depths of 6.7-10 metres, has been operated by Kuwait Ports Authority since 2007. Warehouses and office units are available to rent within the Kuwait Free Trade Zone, as well as land for development, with import and export, services and packing, repacking and assembly industries operating within the zone. Businesses in the zone can be 100% foreign-owned and enjoy exemptions from corporate and personal income tax and no foreign exchange restrictions.
Investment
Inward investment is a major pillar of New Kuwait 2035. The country is aiming to attract $200bn in FDI from 2020-35 as it looks to position itself as a global centre for international commerce, trade and finance. Kuwait’s FDI law, passed in 2013, allows up to 100% foreign ownership for the first time for entities approved by the KDIPA. Other incentives in the law included relief from Customs duties, allocations of land and real estate, and permissions to recruit foreign labour. In January 2024 Kuwait widened the scope for FDI by reforming the law that would allow foreign companies to open local branches without a Kuwaiti agent.
When considering the granting of foreign ownership licences, the KDIPA considers several factors: considering a foreign firm’s ability to create local jobs, provide training and education, transfer technology, diversify national income sources, contribute to exports, support local small and medium-sized enterprises and utilise Kuwaiti products and services. As of 2024, 105 companies were foreign owned, according to the authority’s FY 2024/25 report. However, only certain areas of the economy are open to foreign involvement. These include water, power, wastewater treatment and communications infrastructure, insurance, IT and software development, hospitals and pharmaceuticals and tourism, hotels and entertainment. At the same time foreign-owned firms are excluded from activities related to the extraction of petroleum and natural gas, real estate, public administration and defence.
Kuwait’s total project awards witnessed substantial growth in 2024, up 44% over the previous year to reach KD2.7bn ($8.8bn), the highest figure since 2017. The majority of awards went to the construction sector, as the Public Authority of Housing Welfare made progress on various housing projects and investment, while the government’s push to expand and strengthen the domestic electricity grid boosted project activity in the power and water sectors. According to the National Bank of Kuwait, the project pipeline for 2025 is expected to reach KD7.8bn ($25.4bn), with 60% of projects coming in the infrastructure sector. A notable high-cost project are phases 2 and 3 at the KD1.2bn ($3.9bn) Al Zour North independent water and power plant. In August 2025 the Kuwait Authority for Partnership Projects and the Ministry of Electricity and Water and Renewable Energy signed a letter of agreement with ACWA Power and the Gulf Investment Corporation to develop the Al Zour project in southern Kuwait. The mega-project will have a net power generation capacity of at least 2.7 GW and a net desalinated water production capacity of at least 120m imperial gallons per day when complete, substantially bolstering Kuwait’s electricity generation and water security infrastructure.
Outlook
The outlook for Kuwait’s economy is positive, with the IMF revising its GDP forecast to 2.6% – driven by an expanding non-oil sector and the easing of OPEC+ production reduction limits. Under bold new leadership, the implementation of key reforms and the successful issuance of Kuwait’s first debt instruments in over five years has helped buoy investor confidence and market sentiment. Although oil remains a dominant commodity, sustained focus on structural and institutional reforms, as well as the uptick in non-oil activity signals, are positive signs of Kuwait’s ability to transition towards a resilient economic and diversified model over the medium and long term. As Kuwait continues to pursue economic diversification and implement reforms under New Kuwait 2035, it is unclear at the time of publication what the impact of regional geopolitical tensions will be on the broader economic outlook.
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