Is the reduction of the Kuwaiti dinar proposed to resolve the liquidity crisis?

Economic expert Muhammad Ramadan said devaluation of the Kuwaiti dinar could be the last solution before the state improves its economic situation, saying it is a government decision.

Speaking to Al Arabiya, he added that Fitch’s reduction in his view of Kuwaiti banks did not affect the value of the dinar.

At the same time, he believes the damage from this step is significant, noting that some Gulf countries have poor financial solvency, but continue to peg their currencies to the dollar.

He explained that the most sustainable solution to deal with the liquidity crisis in the state of Kuwait is to pass a law that allows the use of generational reserves when needed.

Last Thursday, Fitch Ratings revised its outlook for 11 Kuwaiti banks to negative from stable, after lowering the outlook for the same country this month.

With “a significant portion of the funding in the banking sector tied to the government,” the agency said, banks would be under pressure if the country itself “comes under pressure.”

On February 2, Fitch downgraded its outlook to class Kuwaiti sovereign debt from negative to stable, warning of the short-term liquidity risks associated with the treasury fund.