Kuwait’s average total public financing needs during the current and next year might decline to less than 27% of the GDP, the International Monetary Fund (IMF) said in report.
The government debt to GDP ratio in Kuwait has reached about 33% in 2020, a report issued by the IMF said.
The IMF report, titled “Arising from the Pandemic: Building Forward Better”, indicated that the ratio of the Kuwaiti government debt to GDP is ranked third after the Kingdom of Bahrain and the Republic of Egypt.
Government debt ratio
In its report on the Middle East and Central Asia, IMF stated that at the end of 2019, the government debt ratio in a third of the regions’ countries reached more than 70% of GDP.
The Regional Economic Outlook report added that the total public financing needs in 5 countries reached more than 15% of GDP.
The Coronavirus pandemic led to a surge in government debt and financing needs in light of the rapid reaction of countries in the Middle East and Central Asia to mitigate the effects of the pandemic, according to a report.
IMF pointed out that although a large number of these countries recorded successes in accessing the international financial markets, local banks covered a large proportion of emerging market financing needs, which led to an increase in their great exposure to the public sector.
Kuwait’s Financing needs
The fund expected that the total public financing needs will remain high in most emerging markets in the Middle East and Central Asia during the period in 2021-2022.
However, there is a possibility of negative developments compared to the baseline scenario in the event of tightening global financial conditions or delaying financial control measures, because the recovery was weaker than expected, or both.
The IMF report showed that increasing reliance on domestic financing will reduce the ability of banks to support the private sector in its exit from the crisis, which will prolong the recovery time.