Fitch threatens Kuwait’s AA rating amid opposition unrest

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Opposition supporters gather outside the Palace of Justice in Kuwait City to protest against the emir’s decision to amend the electoral law. Photo – Yasser Al-Zayyat/AFP

Kuwait received a warning from Fitch Ratings on Tuesday that its AA sovereign credit rating could be downgraded amid escalating political protests.

The credit rating firm declared that despite the nation’s strong balance sheet, the recent popular protests over a change in the election law decreed by the ruling emir is “radicalising the political scene.”

“Prolonged political stalemate could also undermine Kuwait’s rating through its impact on the economy,” Fitch said in a press statement. The rating has a stable outlook.

Emir Sheikh Sabah al-Ahmad al-Sabah dissolved the parliament in early October and called for a new election in a bid to end persistent political turmoil and kickstart development projects. Kuwait is a major oil producer and US ally in the region.

Opposition political parties, dominated by the Islamists, condemned the 19 October move by the ruler. The ruling block was in a minority in the dissolved parliament that was elected in a snap February poll. Voting for fresh elections will take place on 1 December.

“Kuwait’s sovereign external balance sheet is the strongest of all Fitch-rated countries and means the country’s ‘AA’ sovereign rating can endure further political instability. However, a serious escalation of public unrest could threaten the rating. Much will depend on how the authorities respond, and whether large-scale violence is avoided,” Fitch said.

The crisis were triggered when Kuwait’s supreme court annulled the February elections and reinstated the previous, more government-friendly assembly.

Opposition lawmakers feared authorities would try to push through new voting rules that could help pro-government candidates.

Kuwait’s ruling Al Sabah family, despite spending bulk of oil wealth on generous welfare programmes, has come under an unprecedented backlash with Islamist-dominated opposition calling for reforms and more powers for the elected parliament.

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