Financial reform triangle completed with sukuk

Law No. 90 of 2026 Officially Issued to Enable the First-Ever Issuance of Islamic Sukuk

Finance Minister: Enactment of the Law Marks a Significant Step in Developing the Sovereign Financing Framework

Supports the State’s Direction Toward Developing Capital Markets and Enhancing the Efficiency of Financial Liability Management

Finally... the “triangle of financial and economic reform” in the country was completed yesterday. Following the approval of the “Financing and Liquidity” Law No. (60) of 2025, and subsequently Law No. (81) of 2026, which allows the government to borrow from the Future Generations Fund to support the General Reserve, the third law—No. (90) of 2026—was officially issued yesterday. This law enables the state to issue Islamic sukuk for the first time and include them within the sovereign financing structure, alongside conventional bonds, to broaden the investor base both locally and internationally. The move was described as a “historic leap to secure flexible liquidity to address the budget deficit.” (See page 9)

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According to the text, published yesterday in the official gazette “Al-Kuwait Al-Youm,” the executive decree aims to provide a comprehensive and integrated legislation regulating the provisions related to the issuance, offering, and management of government sukuk. It supports the development of local markets and provides new investment instruments for citizens, residents, and foreigners, while also offering a tool for refinancing existing debt in line with the government’s financing plan.

The executive decree stipulates that “government sukuk are financial instruments of equal value, issued for a fixed term in Kuwaiti dinars or foreign currencies, through public or private offerings, either as a standalone issuance or as part of a government issuance program, representing common shares in their underlying assets, in accordance with contract structures compliant with the principles of Islamic Sharia.”

The decree defines the underlying assets of the sukuk as specific assets owned by the state, whether existing or described in the accounts, whether tangible, usufructuary, operational rights, services, or a combination thereof, or assets of a specific project or designated investment activity, provided they are not dedicated to public benefit or classified as natural wealth and resources or public utilities.

The Council of Ministers determines the underlying assets, with the option to exclude any assets it deems appropriate. The decree also defines “sukukization” as the process of issuing sukuk. A Special Purpose Vehicle (SPV) is tasked with acquiring, managing, and dividing the underlying assets into units of equal value, and issuing sukuk based on their value, in addition to all activities related to the issuance.

According to the decree, a decision issued by the Council of Ministers, upon the proposal of the Minister of Finance, specifies the underlying assets against which the sukuk are issued. These assets may be replaced, in whole or in part, during the term of the issued sukuk, provided that the equivalent value of the issued sukuk is maintained, as regulated by the offering prospectus.

The “Special Purpose Vehicle” is established upon the request of the Minister of Finance. It is entrusted with the sukukization process, and it may delegate one or more entities to act on its behalf to undertake the issuance, offering, and management of government sukuk, whether within the state or abroad.

The purposes of the Special Purpose Vehicle, as applicable, include acquiring, safeguarding, and protecting the rights of sukuk holders, managing and overseeing the underlying assets, and collecting income and returns generated from them, such as profits, rents, and other revenues.

The company is responsible for distributing the net profits and returns of the sukuk to their holders, returning the underlying assets upon the expiration of their term or redemption to the entity specified in the offering prospectus, and repaying the nominal value of the sukuk upon maturity or redemption. The company is prohibited from pursuing any other purposes without the approval of the Minister of Commerce and Industry.

The law permits the issuance of sukuk in all forms, including asset-backed sukuk, sukuk representing ownership of benefits and operational rights over assets, salam sukuk, istisna sukuk, musharakah sukuk, mudarabah sukuk, and others, in accordance with the principles of Islamic Sharia. Both natural and legal persons are permitted to subscribe to and hold sukuk. Additionally, the issuance of sukuk restricted to subscription or ownership by Kuwaiti nationals only is allowed.

For his part, Finance Minister Dr. Yaqoub Al-Rifai affirmed that the enactment of the Government Sukuk Law represents a significant step in developing Kuwait’s sovereign financing framework. By expanding the range of financing instruments available to the state and introducing a Sharia-compliant instrument, the law enhances the flexibility in managing financing needs, diversifies funding sources, and broadens the investor base both locally and internationally.

He stated that the law supports the state’s direction toward developing capital markets and improving the efficiency of financial liability management, in line with financial sustainability objectives and preserving the strength of the state’s financial position.