Kuwait faces a deferred liquidity crunch

Significance

The impact of the pandemic and especially lower oil prices hit the government budget hard, since more than nine-tenths of revenue comes from oil sales. However, the country also faces longer-term structural challenges that undermine project implementation.

Impacts

• The emir will seek to avoid fresh elections, which could bring an even more obstructionist National Assembly.
• Tensions with parliament will prevent consideration of measures such as an excise tax on harmful products or a Gulf-agreed value-added tax.
• The government will resist legislative pressure to scale down generous foreign aid, seen as an important source of global soft power.
• The authorities could approach various government entities for dividend transfers to push back the risk of a liquidity crunch.