Kuwait tends to borrow $ 15 billion from the “Generations Reserve”

Credit rating agency Moody’s said in a recent report released yesterday that the vision is still unclear in Kuwait regarding government funding deals, which is why it has lowered the sovereign rating to (A- ), which makes it difficult to anticipate the potential. impact.

The agency expects the General Investment Authority to allow the General Reserve Fund to sell additional shares of its declining group of illiquid assets to the Future Generations Fund.

The agency said the Future Generations Reserve Fund, another savings tool that owns the majority of government savings but is not available to fund the general budget, noting that in light of the depletion of most of the General Reserve Fund’s assets, according to the Al Anbaa newspaper.

Moody’s estimates the value of these assets at a maximum of $ 15 billion to cover budgetary outlays, which will cover about less than half of the funding requirements forecast for the next fiscal year. As such, she expects the government to resort to measures to avoid the financial crisis, which could include passing the long-awaited debt law or amending the current legal framework to allow the transfer of debt. ” a portion of the investment income from the Future Generations Fund to the General Reserve Fund.

He estimates that the liquid portion of the assets of the General Reserve Fund – the smaller stabilization fund – has been largely depleted, but that additional liquidity can be provided by selling the remaining portion of illiquid assets – which we estimate at 12% of the GDP as in February 2021. For the Future Generations Fund.

If the law is amended to allow access to the assets of the aforementioned fund for budgetary purposes, the overall level of sovereign fund assets will decline in the medium term in the absence of a new debt law.

Otherwise, the agency said that if the government passes a new debt law but maintains the current legislative framework of the Future Generations Fund, the level of assets of the sovereign wealth fund will probably increase, but the debt will increase very sharply.

A compromise whereby part of the FGF’s investment income is transferred to the budget in conjunction with a new debt law could preserve the assets of the sovereign fund and slow the accumulation of debt, but it will not eliminate it, according to Moody’s.

She said: “We estimate that the volume of sovereign assets held in the FGF is very large, at 391% of GDP.”