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Kuwait is the world’s 10th largest producer of oil. Total oil production, which is equivalent to half the country’s GDP, was estimated at 2.7 million barrels per day in 2019. Oil revenues account for more than 80% of fiscal revenues and more than 90% of export revenues. Economic growth depends on oil production and on private consumption, which benefits from generous redistribution of oil revenues. The economy is poorly diversified and progress in this respect is likely to remain poor in the medium term given political constraints.

The political situation is the main weakness of Kuwait, with strong opposition between the parliament and the executive. It can have detrimental economic consequences.

Since 2015, the depressed oil prices have entailed fiscal deficits that have become very large. Despite a very healthy solvency situation (the SWF is equivalent to 5 times the GDP), the government is currently running out of cash as it can neither tap the SWF (by law) nor issue debt (the parliament has refused to pass a debt law since 2017). There is no risk of sovereign default and some short-term solutions exist, but this situation highlights the impact of political risk on the fiscal situation.

The KWD, which is linked to a basket of currencies (in which the US dollar is largely overweighed), benefits from this sound financial position.

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