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Sun 30 Apr 2017 03:06 PM

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Kuwait to raise sovereign borrowing ceiling to $65bn

New law being drafted, country plans second bond issuance in 2018

Kuwait to raise sovereign borrowing ceiling to $65bn

Kuwait’s $8 billion debut international bond issue in March could be followed by another, longer-term, issuance in 2018, the country’s finance minister says.

Anas Khaled Al Saleh told Arabian Business in an exclusive interview the country is drafting a law to permit the issuance of longer-term bonds — up to 30 years compared to the five- and 10-year debt issued in March.

Under the proposals, the legislation will permit the government to borrow up to $65.7 billion (KD20 billion) over 20 years; the current ceiling is $32.8 billion (KD10 billion).

Al Saleh said Kuwait planned to tap the international markets again, and that such a bond could be issued in 2018, though at a smaller scale than the $8 billion one and possibly with Islamic instruments such as sukuks, too.

Al Saleh said: “Our plan is to be a rational prudent borrower and continue to be in the market over the coming years, even after we close our deficit. We want to build up a proper sovereign yield curve and help corporates back home to benefit from that.

“We also want to explore new financing instruments for our budget rather than financing it from our reserves.”

The new law to raise the borrowing ceiling is “being drafted at the moment and we hope to finish the process this year”, the minister said.

“It does not mean I’m borrowing more ... Our current law has been around for 10 years and gave the government the ability to borrow KD10 billion. Yet we borrowed only KD1 billion ($3.2 billion) in all those years.

“We are just giving ourselves more room over the coming 20 years.”

Referring to the additional borrowing costs that come with poor sovereign ratings, Al Saleh said: “We will continue being in the market, but want to make sure that [at the heart of all of our decisions] is a focus to maintain our current [Aa2] credit rating.

“We will not overdo issuance or lean more on our reserves. We will balance between them to ensure we maintain our strong credit rating.”

To read the full interview with Anas Al Saleh, finance and deputy prime minister of Kuwait, click here.

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