Al-Shal: Borrowing from the Generations Fund negatively impacts its financial performance
Al-Shaal reported that on September 17, 2026, Fitch Ratings issued its sovereign credit rating report for Kuwait, affirming Kuwait’s rating at “AA” with a stable outlook. The rationale mirrors that of the three major rating agencies: the presence of external financial buffers, specifically the Future Generations Reserve, which represents savings accumulated from oil market booms in excess of revenues. Kuwait was the first country to establish a sovereign wealth fund in February 1953, later fortified by Law No. (106) of 1976 concerning the Future Generations Reserve. This law prohibited any encroachment on the reserve and mandated that 10 percent of total public revenues be transferred to it annually.
In detail, and in figures, Fitch valued the reserve at approximately 668 percent of the 2026 Gross Domestic Product (GDP). 2026 is projected to see GDP decline by approximately 9.8 percent compared to 2025, when GDP stood at around $136.7 billion, or a loss of approximately $13.4 billion according to estimates by the Economist Intelligence Unit (EIU). This implies that Kuwait’s expected GDP for the current year is approximately $123.3 billion.
Like Moody’s, Fitch praised the availability of a new channel for government borrowing, reiterating the same criticism we raised in the Moody’s report: borrowing from the Future Generations Reserve is not counted toward the public debt balance.
However, Fitch added a caveat that repeated borrowing from the Future Generations Reserve could weaken the incentive to reform the distorted fiscal situation. This means that constraints on expansion are merely a governmental decision, enacted by law in a single day, making their reversal easy.
If we translate Fitch’s report into figures regarding the value of the Future Generations Reserve using the EIU’s GDP estimate of $123.3 billion, multiplied by 6.68 times, the estimated size of the reserve is approximately $824 billion, slightly higher than Moody’s estimate of $750 billion. Fitch projected that the potential future public debt financed by the Future Generations Reserve, capped by law at no more than 100 percent of the average revenues of the last five years and no more than 10 percent of its value, would be impacted.
Adding borrowing from the domestic and global markets, public debt is expected to exceed internationally accepted maximum thresholds, yet it is excluded from the public debt total as previously noted.
Fitch is credited with warning about two issues: first, the misuse of borrowing proceeds in a country that spends approximately 81 percent of its public expenditures on salaries, wages, and subsidies; and second, the ease of issuing a second law that modifies the terms and restrictions on borrowing from the Future Generations Reserve, leading to excessive depletion of the fund.
Fitch did not mention what we highlighted in our commentary on the Moody’s report (Issue No. 36): that borrowing from the Future Generations Reserve will negatively affect its financial performance, as it will withdraw necessary liquidity from the fund and cause it to lose high-quality assets, which are the most liquid.
