Oil turmoil pushes Kuwait deeper into debt

Kuwait has stepped up borrowing from domestic and international markets as disruption to oil exports caused by the Iran war puts further pressure on government finances.

The Gulf state’s debt has risen sharply since borrowing resumed last year, as the virtual closure of the Strait of Hormuz threatens to widen an already substantial budget deficit.

Domestic debt, which includes bonds and sukuk issued to local banks and other institutions, stood at KD3.85 billion ($12.7 billion) by the beginning of October, the finance ministry said in a report this week.

Bonds issued to global investors totalled around $17 billion, all marketed in the 12 months from October 2025.

The report showed that Kuwait issued six bond tranches in the international market, where there were reports of strong demand.

“Despite the surge in Kuwait’s debt over the past year, the country still has one of the lowest debts relative to gross domestic product,” said Ali Al-Anzi, head of the Kuwait-based Al-Manakh economic consultancy.

Kuwait, which controls more than 100 billion barrels of recoverable oil deposits, forecast a budget deficit of KD9.7 billion in its 2026-27 fiscal year, which started on April 1.

The projected shortfall is nearly 50 percent higher than the 2025-26 deficit of KD6.3 billion and almost nine times the 2024-25 fiscal gap of KD1.05 billion, according to the ministry.

At the end of June, Kuwait’s debt had risen more than fivefold as it stepped up borrowing to support a spiralling deficit.

Further reading:

• Kuwait turns to debt markets as Hormuz disruption hits revenue
• Kuwait raises $11bn as investors snap up Gulf debt
• Law change enables Kuwait to tap global debt markets

The Gulf state was one of the least indebted nations in 2025, with its debt-to-GDP ratio as low as 3 percent in the absence of budget-related borrowing, according to former Kuwaiti finance minister Subaih Al-Mukhaizeem.

Before it approved a debt law in March last year, Kuwait had resorted to withdrawing from its general reserve fund to finance budget deficits.