Kuwait issues $1.3bn bonds to fund fiscal gap

Kuwait has issued fresh bonds worth KD400 million ($1.3 billion) in the local market to fund its budget deficit, its first such debt issuance since the start of the conflict on February 28 between Iran and the US-Israeli alliance.

Analysts expect Kuwait to issue more bonds in the coming months due to the forecast decline in revenues following the closure of the Strait of Hormuz, which has blocked its crude exports. 

Despite the ongoing ceasefire which began two weeks ago, Hormuz has remained shut by Iran, depriving Kuwait and other Gulf oil producers of their export lifeline.

The Central Bank of Kuwait (CBK) said on Wednesday it has issued two tranches worth KD200 million each in the local market. Both carry a 3 percent rate and have a maturity period of two and three years respectively.

“These issuances were largely over-subscribed by local banks, you can say by more than three times. This is because banks have large liquidity levels and the bonds are safe,” said Ali Al-Anzi, manager of Kuwait’s Al-Manakh economic consultancy centre.

“I expect the central bank to issue more bonds in the coming period because not much oil revenues are coming into the state coffers due to the Hormuz closure.”

The latest issuance is the third in 2026 and the 14th to be released since Kuwait relaunched a landmark debt law in March 2025 to borrow nearly $100 billion over a period of 50 years.

The new bonds brought to nearly KD2.6 billion ($8.6 billion) the total dinar-denominated issuances by CBK in the Kuwaiti market since the approval of the law.

Kuwait, which is one of the world’s largest oil producers, has suffered from persistent budget deficits given its heavy reliance on unpredictable crude export earnings despite longstanding plans to diversify sources of income.

Kuwait’s economic indicators

The emirate has forecast a deficit of KD6.3 billion ($20.8 billion) in its 2025-26 fiscal year, based on an oil price of around $68 a barrel and a projected increase in non-oil revenues with the enforcement of new taxes.

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In October last year the emirate raised $11.25 billion from a three-part bond sale in global markets, drawing hefty investor demand for its first US dollar issue since 2017.

Releasing the 2026-27 draft budget earlier this year, the Kuwaiti finance ministry said it expects the deficit to rise by nearly 55 percent due to a projected decline in oil revenues and higher spending.

The draft budget for the 2026-27 fiscal year, which started on April 1, forecast revenues at KD16.3 billion ($53.8 billion) and expenditure at KD26.1 billion ($86.2 billion), with an expected shortfall of KD9.8 billion.