{
  "title": "Kuwait: Staff Concluding Statement of the 2025 Article IV Mission",
  "publication": "IMF News, December 18, 2025",
  "sourceUrl": "https://www.imf.org/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission",
  "canonical": "https://www.imf.org/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission",
  "overlayPath": "/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/index.md",
  "summary": "Kuwait is embarking on a structural transformation and investment scale-up to realize its Vision 2035 aspiration to diversify the economy. Going forward, this requires a comprehensive package of fiscal and structural reforms, including:",
  "publishDate": "2025-12-18",
  "sections": [
    {
      "heading": "Developments, the Outlook and Risks",
      "content": "- Transition underway from an oil dependent welfare state towards a dynamic and diversified economy; reform momentum has been building since May 2024 with enactment of the Financing and Liquidity Law.\n- Economic activity and inflation:\n  - Real GDP expanded by 1.7 percent (y-o-y) in 2025Q2.\n  - Non-oil growth was 3.1 percent (y-o-y) in 2025Q2.\n  - Headline CPI inflation reached 2.4 percent (y-o-y) in August (so far in 2025).\n- External position and buffers:\n  - Current account surplus declined to 29.1 percent of GDP in 2024.\n  - Official reserve assets stood at 8.3 months of projected imports at end-2024.\n  - External position in 2025 was substantially weaker than the level implied by medium-term fundamentals and desirable policies, reflecting excessive reliance on oil exports and inadequate public saving of oil revenue; external buffers are ample.\n- Fiscal outcomes:\n  - Fiscal deficit of the budgetary central government narrowed to 2.2 percent of GDP in FY2024/25.\n  - General government fiscal surplus widened to 27.7 percent of GDP in FY2024/25, reflecting higher estimated SWF investment income.\n  - Government issued 4.6 percent of GDP in domestic bonds and 7.1 percent of GDP in external bonds as of end-October (resuming sovereign debt issuance after an almost decade long hiatus).\n- Financial sector:\n  - Banks have maintained strong capital and liquidity buffers consistent with CBK regulatory requirements.\n  - Credit growth to the non-financial private sector has been picking up.\n  - Nonperforming loans remain low and well provisioned for.\n- Baseline projections (assuming current policies):\n  - Real GDP: 2.6 percent in 2025 and 3.8 percent in 2026; stabilizing just above 2.0 percent over the medium term.\n  - Non-oil GDP: 2.7 percent in 2025 and 3.0 percent in 2026; then at 2.7 percent over the medium term.\n  - Headline CPI inflation: 2.3 percent in 2025 and 2.1 percent in 2026; stabilizing just below 2.0 percent over the medium term.\n  - Current account surplus: 22.9 percent of GDP in 2025 and 19.1 percent of GDP in 2026; then gradually declining over the medium term.\n  - Budgetary central government fiscal deficit: 8.7 percent of GDP (4.2 billion KD) in FY2025/26 and 9.4 percent of GDP (4.6 billion KD) in FY2026/27; widening to 11.5 percent of GDP (7.0 billion KD) by FY2031/32.\n  - Net financing need for the budgetary central government from FY2025/26 to FY2031/32: 39.1 billion KD.\n- Risks:\n  - Broadly balanced around the baseline.\n  - External risks: commodity price volatility, global growth slowdown or acceleration, shifts in global financial conditions—transmitted mainly via oil prices and OPEC+ production.\n  - Main domestic risk: pace of structural reforms and infrastructure project implementation."
    },
    {
      "heading": "Fiscal Policy — Reinforcing Long-Term Fiscal Sustainability",
      "content": "- Long-term fiscal need:\n  - Kuwait would need about 10 percent of GDP in fiscal consolidation over the next decade to equitably distribute oil wealth across current and future generations, accounting for population growth.\n  - Fiscal consolidation should be implemented at a pace of about 1 percent of GDP per year—without which the fiscal deficit would deteriorate by about 0.5 percent of GDP per year—with manageable impacts on growth and inflation.\n- Revenue and tax measures:\n  - Mobilize non-oil revenue by extending the 15 percent CIT to all domestic companies, introducing the GCC-wide excise tax, and introducing a 5 percent VAT.\n- Public sector pay and employment:\n  - Introduce a performance-based public sector wage-setting mechanism to gradually reduce the large premium over the private sector.\n  - Institute a hiring cap to steadily lower the public sector employment share.\n  - Streamline or integrate allowances into base salaries.\n- Energy subsidies and pricing:\n  - Phase out energy subsidies by gradually raising retail electricity, water and fuel prices towards their GCC-average levels.\n  - Provide targeted transfers to vulnerable groups via the existing social assistance system.\n  - Enhance electricity generation and distribution efficiency to reduce costs.\n- Public investment:\n  - Scale up public investment by around 2.5 percent of GDP over the medium term to mitigate contractionary impacts of consolidation when combined with structural reforms.\n- Public financial management (PFM) and debt management:\n  - Develop a medium-term fiscal framework, including a fiscal rules framework with a ceiling on public debt and a target for the non-oil fiscal balance.\n  - Expand coverage of fiscal accounts statistics to the general government level.\n  - Undertake periodic public investment management assessments and publish a medium-term debt management strategy including a bond issuance calendar.\n  - Develop a sovereign asset-liability management framework to balance intergenerational fiscal policy tradeoffs and manage public sector balance sheet risks."
    },
    {
      "heading": "Monetary Policy and Financial Sector — Maintaining Macrofinancial Stability",
      "content": "- Exchange rate and monetary stance:\n  - The exchange rate peg remains an appropriate nominal anchor for monetary policy.\n  - Since September 2024, the CBK has cut its policy rate by 75 basis points.\n  - The policy rate remains above neutral and is in line with controlling inflation and stabilizing non-oil output.\n  - Under the baseline, monetary normalization should continue as inflation moderates and the non-oil output gap closes.\n- Financial stability and regulation:\n  - Under CBK stress tests, system capitalization and liquidity generally exceeded Basel III minimum requirements; individual bank shortcomings were limited.\n  - With the credit cycle near its midpoint, CBK could consider reclassifying part of its country-specific capital buffer as a positive neutral countercyclical capital buffer.\n  - The forthcoming Real Estate Financing Law will permit banks to offer mortgage loans for the first time; CBK should continue regular reviews of the regulatory perimeter and macroprudential toolkit.\n  - Continue risk-based supervisory approach to assess banks and address vulnerabilities.\n- Financial regulatory reforms recommended:\n  - Replace the unlimited guarantee on bank deposits with a limited deposit insurance framework to address moral hazard.\n  - Adopt Basel III endgame requirements to constrain capital risk-weights.\n  - Phase out bank lending rate caps to support efficient pricing of default risk while expanding access to credit to riskier borrowers.\n- Financial deepening:\n  - The Financing and Liquidity Law presents an opportunity to deepen the domestic bond market and develop a market-based benchmark yield curve.\n  - CBK is developing an auction-based primary market open to a broader range of investors to support price discovery and fiscal savings."
    },
    {
      "heading": "Structural Reforms — Boosting Non-Oil Growth",
      "content": "- Overall approach:\n  - Implement a structural reform package to unify the labor market and improve the business environment to sustainably boost non-oil growth.\n- Labor market:\n  - Address labor market duality: Kuwaitis largely prefer public sector jobs while expatriates fill most private sector jobs.\n  - Move toward performance-based compensation in the public sector and expand vocational training programs to incentivize private sector employment by Kuwaitis.\n- Housing and land policy:\n  - Government announced PPP projects to build some 185,000 homes and associated infrastructure to meet strong housing demand.\n  - Sustainably satisfying housing demand will require reducing implicit subsidies.\n  - Full foreign ownership of land is now permitted; scale up public land sales for commercial development.\n- Financial markets and AML/CFT:\n  - Use the Financing and Liquidity Law to deepen the domestic bond market and develop a benchmark yield curve.\n  - Progress is being made to strengthen AML/CFT effectiveness; authorities are working to address deficiencies identified by the 2024 FATF Mutual Evaluation Report."
    },
    {
      "heading": "Statistics and Data Gaps",
      "content": "- Statistical capacity has weakened further from a low base, hampering IMF surveillance.\n- Major gaps persist in national accounts, prices, government finance and external sector statistics.\n- Priority actions:\n  - Boost funding of the Central Statistical Bureau (CSB) to resume the annual establishment survey suspended since 2020.\n  - Fill gaps where:\n    - Expenditure-side GDP statistics remain unavailable for 2024.\n    - Publication of CPI statistics was temporarily paused.\n    - Fiscal accounts statistics exclude government investment income and SOE profit transfers.\n    - IIP statistics exclude government foreign assets.\n  - Expand coverage of fiscal accounts and external sector statistics, especially now that the government has resumed issuing debt.\n\nSource: Kuwait: Staff Concluding Statement of the 2025 Article IV Mission\n\n---\n\n\n References\n\n- Kuwait and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/index.md)",
    "[Structured JSON version](/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/index.json)",
    "[Bundle manifest](/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json)",
    "Published: December 18, 2025",
    "Transition underway from an oil dependent welfare state towards a dynamic and diversified economy; reform momentum has been building since May 2024 with enactment of the Financing and Liquidity Law.",
    "Economic activity and inflation:",
    "External position and buffers:",
    "Fiscal outcomes:",
    "Financial sector:",
    "Baseline projections (assuming current policies):",
    "Risks:",
    "Long-term fiscal need:",
    "Revenue and tax measures:",
    "Public sector pay and employment:",
    "Energy subsidies and pricing:",
    "Public investment:",
    "Public financial management (PFM) and debt management:",
    "Exchange rate and monetary stance:",
    "Financial stability and regulation:",
    "Financial regulatory reforms recommended:",
    "Financial deepening:",
    "Overall approach:",
    "Labor market:",
    "Housing and land policy:",
    "Financial markets and AML/CFT:",
    "Statistical capacity has weakened further from a low base, hampering IMF surveillance.",
    "Major gaps persist in national accounts, prices, government finance and external sector statistics.",
    "Priority actions:",
    "[Kuwait and the IMF](http://www.imf.org/external/country/KWT/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/index.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/index.md",
    "json": "/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/index.json",
    "bundleManifest": "/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-26T04:21:15.640Z"
}