Kuwait lenders pull $8bn from central bank after war stimulus

Kuwaiti banks withdrew half their deposits from the central bank in the first nine months of this year, following emergency measures introduced to encourage lending during the Iran war.

Commercial lenders’ deposits at the Central Bank of Kuwait fell to KD2.4 billion ($8 billion) at the end of September, from KD4.8 billion at the end of 2025, data from the central bank shows.

The decline follows a CBK decision in March to relax liquidity requirements as part of a stimulus package, allowing banks to deploy more funds into lending as the conflict disrupted Kuwait’s oil-dependent economy.

The drop in bank deposits was expected due to the stimulus package, said Ali Al-Anzi, head of Kuwait-based economic consultancy Al-Manakh.

“Banks wanted to meet growing credit needs in the business sector and for personal loans… hence there was credit growth of more than 5 percent in the first nine months,” he added.

Further reading:

• Kuwait sukuk law widens government financing options
• Kuwait launches stimulus package for banks
• Kuwait orders banks to keep all cash in vaults

The steps announced in March include a temporary easing of macroprudential ratios, with the minimum liquidity coverage ratio (LCR) and net stable funding ratio cut from 100 percent to 80 percent. The minimum regulatory ratio was reduced from 18 percent to 15 percent.

LCR is a Basel III regulatory standard requiring banks to hold enough high-quality liquidity – such as cash or government bonds – to survive a 30-day “run”, or liquidity stress.

Government accounts and deposits with the CBK fell to KD1.3 billion by September 30 from KD1.37 billion nine months earlier as Kuwait struggled to fund spending following a drop in oil export earnings due to the closure of the Strait of Hormuz, the report showed.

The plunge in revenue has forced Kuwait, which controls over 100 billion barrels in oil reserves, to step up borrowing, with debt soaring fivefold by the end of June.

Given its heavy reliance on volatile oil sales, lower crude revenue widened Kuwait’s 2025-26 fiscal deficit by nearly 13 percent to KD7 billion, the finance ministry said earlier this year.