- Gulf state to tap global market after oil slump: Finance chief
- Kuwait pushing ahead with projects, to combine state entities
Kuwait hired consulting firm Oliver Wyman & Co. to advise on a debt strategy as it prepares to tap the global bond market to plug a budget gap after oil revenue slumped.
The energy-rich Gulf country is planning to sell international bonds and has already started issuing local debt to cover an estimated fiscal shortfall of about 8 billion dinars ($26.5 billion), Finance Minister Anas Al-Saleh said in an interview in Kuwait City on Wednesday.
“You have to finance the deficit one way or another,” Al-Saleh said. “We started going to the local market by the central bank and we are increasing our issuance. We see a great appetite. Now we are going to the international debt market.”
Al-Saleh declined to comment on the size or timing of international bond sales, saying no decision has been taken yet, though he rubbished media reports that $5 billion of debt would be sold in the third quarter of this year.
The plunge in oil prices is forcing Kuwait to rethink its finances. Al-Saleh is pushing an economic reform agenda to help reduce dependence on crude, by cutting wasteful spending, reducing utility subsidies and introducing corporate taxes.
The oil decline “has clearly shown the structural issues in our economy,” the minister said. “But, and this is the good side, with our robust budget, having low debt, strong local and international reserves, it helps us making reform quite steadily” without “reacting aggressively” with steep spending cuts.
Al-Saleh said that Kuwait’s deficit this year may turn out to be smaller than the 8 billion-dinar forecast because of recent gains on oil markets. He said Kuwait isn’t canceling any infrastructure projects and has actually increased capital spending, even as it trims current expenditures, because “we are determined to go forward and spend as much as possible on our economy and infrastructure.”
As an example of streamlining state entities, Al-Saleh cited plans to combine the port and customs authorities, and to merge other state entities to reduce red tape.
A number of government-backed entities have been tapping the loan market for funding. Kuwait Oil Tanker Co., a unit of state-owned refiner Kuwait Petroleum Corp., has invited banks to pitch for arranger roles on a loan of about 1 billion dinars ($3.3 billion), two bankers familiar with the matter said this week.