S&P reaffirms Kuwait’s AA rating and has given the country a ‘stable’ lookout thanks to its existing resources of crude oil.
Amidst the growing turmoil that some countries are facing with regard to their credit rating in the international market, Standard and Poor (S&P) one of the world’s biggest credit rating organisations have confirmed Kuwait’s rating at ‘AA’, whilst giving it a ‘stable’ lookout.
Kuwait lies in the Northwest coast of the Persian Gulf and is a country known for its vast crude oil reserves. The country’s existing crude oil reserves have been a major contributor in its ‘AA’ status being reaffirmed by Standard and Poor. The presence of these crude oil reserves have invariably accounted for the country’s long term financial stability with its economy expected to withstand and tide over financial tumults.
Some of the main reasons behind Kuwait’s ‘stable’ ranking were listed out as:
- Strong internal capital base providing substantial buffering for any potential losses arising out of loan defaulting
- Strong lookout for banking operations substantiated by strong base of assets and deposits
This evaluation was carried out under Standard and Poor’s BICRA (Banking Industry Country Risk Assessment) procedure and based on this assessment; Kuwait has been listed in the BICRA Group four alongside middle-eastern countries like Oman and Qatar. The grouping of countries under the BICRA scale reflects the country’s financial activities carried out by the entirety of the nation’s financial and banking organisations. On a scale of one to 10, one reflects the country whose banking and financial activities are subject to the least possible risks, while 10 reflects the country whose banking and financial activities are subject to the highest possible risks.
According to Standard and Poor, though Kuwait has a favourable outlook as far as its credit ratings are concerned, there are a few concerning areas that the country needs to address primarily. These include:
- Comparatively less emphasis on stringent banking regulations allowing for a potential oversight
- Lesser prospects on further development of banking activities within Kuwait causing banking organisations to seek out foreign markets instead of emphasising on internal markets
Where political problems are affecting the economic activities of many countries in the world, including many in the Middle-east, the support system lent by Kuwaiti governmental authorities has been the pivotal and the most influential source that have accounted for Kuwait being given the ‘AA’ status, making Kuwait a worthy example to follow suit.
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