Kuwait Issues Government Sukuk Law

Kuwait has officially incorporated government sukuk into its toolkit for financing public needs and managing debt, following the issuance of Law Decree No. 90 of 2026 concerning government sukuk, which was published in the “Kuwait Today” newspaper. This decree establishes a comprehensive legislative framework enabling the state to issue a wide range of sukuk both domestically and internationally, denominated in either Kuwaiti dinars or foreign currencies.

The law opens the door for natural and legal persons, including non-Kuwaitis, to subscribe to government sukuk, while allowing certain issuances to be restricted exclusively to Kuwaiti citizens. The subscription prospectus for each issuance specifies eligible investor categories and participation conditions.

The explanatory memorandum outlines various sukuk structures, including asset leasing sukuk, sukuk for leasing government asset benefits and operational rights, salam sukuk, istisna’ sukuk, as well as mudaraba and musharaka sukuk for new government projects within development plans, alongside other issuance structures compliant with Islamic Shariah principles.

This diversity allows the government to structure issuances tailored to the nature of assets, projects, and varying funding needs, rather than relying on a single sukuk model.

A key innovation of the law decree is the establishment of a special purpose company (SPC) structured as a single-shareholder entity, fully owned by the state, tasked with roles related to sukuk structuring and asset management. The regulations governing this company cover its establishment, objectives, registration, legal form, management, and oversight.

The law decree also exempts the company from fees and taxes, referring the details of its registry at the Ministry of Commerce and Industry and the registration system to the executive regulations.

To protect the interests of sukuk holders, the law permits the SPC, with the Minister’s approval, to appoint a custodian and an investment manager to safeguard and manage sukuk assets in the holders’ best interests. A dedicated chapter on sukuk management outlines the investment manager’s responsibilities, investor disclosure requirements, and the organization of the sukuk holders’ body, the auditor, and the sukuk fiscal year.

The Shariah Board is responsible for verifying that the terms and structures of government sukuk comply with Islamic Shariah principles, as well as ruling on related Shariah aspects according to its operational rules.

The existence of a unified Shariah Board is expected to ensure greater consistency across different government issuances, rather than establishing an independent Shariah reference for each issuance.

The law sets specific regulations regarding the currency and location of issuance. It requires prior written approval from the Central Bank of Kuwait for issuing government sukuk domestically in Kuwaiti dinars. For domestic issuances in foreign currencies, coordination with the Central Bank of Kuwait and relevant authorities is required. These regulations aim to align sukuk issuance with monetary policy and local market liquidity.

The legislation distinguishes government sukuk from commercial or private securities, stipulating that the provisions of Law No. 7 of 2010 concerning the establishment of the Capital Markets Authority and the regulation of securities activities, along with its executive regulations and amendments, do not apply to the issuance, offering, or management of government sukuk issued under the new law.

In parallel, the decree-law, following the approval of the Minister of Finance, authorized the listing of government sukuk in local and foreign capital markets, with trading in the local market to be conducted in accordance with the rules enforced by the Capital Markets Authority, and in line with the conditions set forth in the prospectus and as determined by the Sharia Supervisory Board.

Thus, the law distinguishes between the issuance, offering, and management phases, which are governed by the specific legislation on government sukuk, and the trading of sukuk once listed in the local market, which is subject to the rules applicable in the capital market.

The law places particular emphasis on defining the eligible investor base for issuances, stipulating that natural and legal persons may subscribe to government sukuk. This is not limited to Kuwaiti nationals; the law also permits the issuance of sukuk to non-Kuwaitis, thereby allowing residents and foreign investors to participate in issuances, provided the respective prospectus allows for such participation.

Simultaneously, the legislation grants the government the flexibility to issue sukuk restricted exclusively to Kuwaiti nationals, with eligible categories specified in the prospectus for each issuance. This represents one of the most significant investment features of the law, as it enables each issuance to be tailored to its specific purpose and target investor base.

Furthermore, the law permits the involvement of one or more underwriters in sukuk issuances. An underwriter may commit to fully covering the issuance and reselling it if it is not fully subscribed by eligible investors. Alternatively, an underwriter may commit to covering the unsubscribed portion of the issuance.

The decree-law also addresses the attachment of government sukuk and their profits, subjecting forced execution to the rules applicable to securities under the Capital Markets Authority Law, to the extent that such rules do not conflict with the provisions of the Government Sukuk Law.

Additionally, sukuk form part of the diversification of fiscal policy instruments to finance the objectives outlined in Decree-Law No. 60 of 2025 on Financing and Liquidity, which constitutes the broader framework for government borrowing and financing.

The government has established a set of economic objectives for the law. The explanatory memorandum indicates that the legislation will contribute to the development of local markets, the growth of the national economy, and the provision of new investment instruments. It also aims to expand investment opportunities for citizens, residents, and foreigners. The entry of a sovereign issuer into the sukuk market can broaden the range of financial instruments available to local investors and institutions.

The law stipulates that the General Reserve Fund shall bear the costs of implementing the decree-law. Meanwhile, the executive regulations must be issued by a Cabinet decision, upon the proposal of the Minister of Finance, within three months from the date the law comes into effect.

The executive regulations will complete a number of procedural and regulatory details, particularly those concerning special purpose vehicles, the Sharia Supervisory Board, and other implementation mechanisms.