Wathaqah: S&P and Fitch are more lenient than Moody's!
... to the final, unfortunately incomplete, poem in my personal archive of Kuwaiti folk poetry.
In this poem, Boursali criticizes the frequent reliance on foreigners, specifically British figures such as consultants and engineers “Scott” and “Campbell,” following the surge in oil revenues in the mid-20th century. He expresses his displeasure with foreign interference in the administration of government departments during that era, where Abdullah—whose full name I do not know—may have been the head of one such department.
I recalled this poem about Scott and Campbell while reading, over the past days and weeks, reports from credit rating agencies such as “Moody’s” and “Fitch” on Kuwait, particularly concerning the country’s public debt. I realized how harsh Fahd Boursali—may God have mercy on him—was, as usual, in his judgments of others. The British consultants of that time mostly offered advice limited to foundational and infrastructure matters, such as construction, new districts, organizing government departments, and certain services like electricity and water. Fahd’s opposition, or that of other segments of society, likely stemmed from a fear of changing the familiar and customary, such as the old city districts, or from resistance to lighting the “sikk” (traditional market areas) at night, among other things.
However, the reports from “Moody’s” and “Fitch” are far more dangerous than the advice of Scott and Campbell. Within the past month, both agencies issued reports on the state of public debt, emphasizing the importance of ensuring liquidity for the Kuwaiti government without any consideration or comment on the quality of this spending or its achievement of goals related to addressing structural economic imbalances, such as increasing non-oil revenues, reforming the labor market, adjusting the demographic composition, or developing and diversifying the gross domestic product.
Moreover, both reports agreed not to include the Kuwaiti government’s borrowing from the Future Generations Fund in the value of Kuwait’s sovereign debt, despite the government itself having decided to account for it as a financial obligation due for repayment. In my view, what led “Moody’s” and “Fitch” to agree on excluding this obligation was “foreign malice” aimed at encouraging Kuwait’s finance to borrow more from banks, as long as debt-to-GDP ratios remained at low levels.
I will not repeat the discussion of the profound failure of credit rating agencies in their misjudgments prior to the 2008 global financial crisis, but I wish to emphasize that these institutions are not as neutral as some believe.
These credit agencies continuously encourage Gulf states, in particular, to weaken independent oversight, whether parliamentary or from bodies with a supervisory nature, such as audit offices. They also support government borrowing policies regardless of the efficiency of the spending, without discussing the quality of implementation or its alignment with correct economic objectives. Furthermore, they shift the burden of public administration failures onto society, especially during periods of fiscal deficit, by calling for the imposition of taxes and increased fees. These are, in reality, unfair opinions and suggestions, as they often derive their views and information from executive leaders who reflect their own perceptions and experiences as facts, which credit rating agencies then quickly adopt.
What must be understood in dealing with credit rating agencies is that their scope of work, language, and discourse are directed at two groups: first, lenders, i.e., banks; and second, investors. Consequently, their reports should be treated within this scope and not as mandatory recommendations to be implemented... If the post-oil era requires something of Scott’s cap and Campbell’s suit, today Kuwait’s economic imbalances are no longer hidden from leaders and citizens alike. All we need is serious will and conscious management.
