S&P rating upgrade Kuwait fiscal reform marked a significant development for the Gulf nation as Standard & Poor’s Global Ratings raised Kuwait’s long- and short-term sovereign credit ratings to ‘AA-/A-1+’ from ‘A+/A-1’. The decision followed sustained momentum in fiscal reform and reduced funding risks, reflecting increased confidence in Kuwait’s financial management and reform trajectory.
Kuwait’s fiscal and reform progress
S&P attributed the upgrade to Kuwait’s implementation of fiscal and economic reforms aligned with the country’s Vision 2035 strategy. The agency noted that measures targeting economic diversification, infrastructure modernization, and increased non-oil revenues are helping Kuwait consolidate its fiscal position. Among the reforms is the rollout of a 15 percent corporate income tax aimed mainly at multinational companies, set to take effect from January 2025, with details under a new Business Profits Tax Law and phased implementation for broader compliance. These moves are expected to support fiscal sustainability and reduce reliance on oil revenue.
Stable outlook and economic indicators
S&P maintained a stable outlook for Kuwait, citing its robust stock of government financial assets and expectations that fiscal and external balances will remain strong over the medium term. Despite continued headline fiscal deficits forecast at an average of 7% of GDP over 2025–2028, S&P believes these will be managed through debt issuances and drawdowns from government reserve funds. Kuwait’s economy recorded 1.3% annual growth in the first half of 2025, with forecasts of average growth reaching 2% from 2025 to 2028. Major investment initiatives like the Northern Economic Zone and Mubarak al-Kabeer port expansion are also set to stimulate economic activity.
Impact of fiscal reforms on business
The new fiscal and tax framework, particularly the corporate income tax, will require businesses especially multinationals to comply with comprehensive registration, reporting, and advance tax payments beginning in 2026. Companies with annual revenues exceeding 1.5 million Kuwaiti dinars will fall under the new regime, while state-owned entities remain exempt. Other reforms include strict record-keeping guidelines and allowances for loss deductions over five years, reflecting efforts to bring Kuwait’s tax environment closer to international standards.
Future outlook
S&P expects Kuwait’s fiscal consolidation and reform momentum to mitigate risks related to dependence on hydrocarbons, oil price fluctuations, and fiscal expenditures. With strong financial buffers and ongoing investment in key sectors, Kuwait’s sovereign credit rating is expected to remain supported by prudent policy and reform implementation.
