## Kuwait: Staff Concluding Statement of the 2025 Article IV Mission

_IMF News, December 18, 2025_

## Source details

**Canonical URL:** [Kuwait: Staff Concluding Statement of the 2025 Article IV Mission](https://www.imf.org/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission)

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## Bibliographic details
- Published: December 18, 2025

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### Developments, the Outlook and Risks
- 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:
  - Real GDP expanded by 1.7 percent (y-o-y) in 2025Q2.
  - Non-oil growth was 3.1 percent (y-o-y) in 2025Q2.
  - Headline CPI inflation reached 2.4 percent (y-o-y) in August (so far in 2025).
- External position and buffers:
  - Current account surplus declined to 29.1 percent of GDP in 2024.
  - Official reserve assets stood at 8.3 months of projected imports at end-2024.
  - 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.
- Fiscal outcomes:
  - Fiscal deficit of the budgetary central government narrowed to 2.2 percent of GDP in FY2024/25.
  - General government fiscal surplus widened to 27.7 percent of GDP in FY2024/25, reflecting higher estimated SWF investment income.
  - 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).
- Financial sector:
  - Banks have maintained strong capital and liquidity buffers consistent with CBK regulatory requirements.
  - Credit growth to the non-financial private sector has been picking up.
  - Nonperforming loans remain low and well provisioned for.
- Baseline projections (assuming current policies):
  - Real GDP: 2.6 percent in 2025 and 3.8 percent in 2026; stabilizing just above 2.0 percent over the medium term.
  - Non-oil GDP: 2.7 percent in 2025 and 3.0 percent in 2026; then at 2.7 percent over the medium term.
  - Headline CPI inflation: 2.3 percent in 2025 and 2.1 percent in 2026; stabilizing just below 2.0 percent over the medium term.
  - 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.
  - 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.
  - Net financing need for the budgetary central government from FY2025/26 to FY2031/32: 39.1 billion KD.
- Risks:
  - Broadly balanced around the baseline.
  - External risks: commodity price volatility, global growth slowdown or acceleration, shifts in global financial conditions—transmitted mainly via oil prices and OPEC+ production.
  - Main domestic risk: pace of structural reforms and infrastructure project implementation.

### Fiscal Policy — Reinforcing Long-Term Fiscal Sustainability
- Long-term fiscal need:
  - 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.
  - 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.
- Revenue and tax measures:
  - 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.
- Public sector pay and employment:
  - Introduce a performance-based public sector wage-setting mechanism to gradually reduce the large premium over the private sector.
  - Institute a hiring cap to steadily lower the public sector employment share.
  - Streamline or integrate allowances into base salaries.
- Energy subsidies and pricing:
  - Phase out energy subsidies by gradually raising retail electricity, water and fuel prices towards their GCC-average levels.
  - Provide targeted transfers to vulnerable groups via the existing social assistance system.
  - Enhance electricity generation and distribution efficiency to reduce costs.
- Public investment:
  - 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.
- Public financial management (PFM) and debt management:
  - 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.
  - Expand coverage of fiscal accounts statistics to the general government level.
  - Undertake periodic public investment management assessments and publish a medium-term debt management strategy including a bond issuance calendar.
  - Develop a sovereign asset-liability management framework to balance intergenerational fiscal policy tradeoffs and manage public sector balance sheet risks.

### Monetary Policy and Financial Sector — Maintaining Macrofinancial Stability
- Exchange rate and monetary stance:
  - The exchange rate peg remains an appropriate nominal anchor for monetary policy.
  - Since September 2024, the CBK has cut its policy rate by 75 basis points.
  - The policy rate remains above neutral and is in line with controlling inflation and stabilizing non-oil output.
  - Under the baseline, monetary normalization should continue as inflation moderates and the non-oil output gap closes.
- Financial stability and regulation:
  - Under CBK stress tests, system capitalization and liquidity generally exceeded Basel III minimum requirements; individual bank shortcomings were limited.
  - 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.
  - 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.
  - Continue risk-based supervisory approach to assess banks and address vulnerabilities.
- Financial regulatory reforms recommended:
  - Replace the unlimited guarantee on bank deposits with a limited deposit insurance framework to address moral hazard.
  - Adopt Basel III endgame requirements to constrain capital risk-weights.
  - Phase out bank lending rate caps to support efficient pricing of default risk while expanding access to credit to riskier borrowers.
- Financial deepening:
  - The Financing and Liquidity Law presents an opportunity to deepen the domestic bond market and develop a market-based benchmark yield curve.
  - CBK is developing an auction-based primary market open to a broader range of investors to support price discovery and fiscal savings.

### Structural Reforms — Boosting Non-Oil Growth
- Overall approach:
  - Implement a structural reform package to unify the labor market and improve the business environment to sustainably boost non-oil growth.
- Labor market:
  - Address labor market duality: Kuwaitis largely prefer public sector jobs while expatriates fill most private sector jobs.
  - Move toward performance-based compensation in the public sector and expand vocational training programs to incentivize private sector employment by Kuwaitis.
- Housing and land policy:
  - Government announced PPP projects to build some 185,000 homes and associated infrastructure to meet strong housing demand.
  - Sustainably satisfying housing demand will require reducing implicit subsidies.
  - Full foreign ownership of land is now permitted; scale up public land sales for commercial development.
- Financial markets and AML/CFT:
  - Use the Financing and Liquidity Law to deepen the domestic bond market and develop a benchmark yield curve.
  - Progress is being made to strengthen AML/CFT effectiveness; authorities are working to address deficiencies identified by the 2024 FATF Mutual Evaluation Report.

### Statistics and Data Gaps
- 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:
  - Boost funding of the Central Statistical Bureau (CSB) to resume the annual establishment survey suspended since 2020.
  - Fill gaps where:
    - Expenditure-side GDP statistics remain unavailable for 2024.
    - Publication of CPI statistics was temporarily paused.
    - Fiscal accounts statistics exclude government investment income and SOE profit transfers.
    - IIP statistics exclude government foreign assets.
  - Expand coverage of fiscal accounts and external sector statistics, especially now that the government has resumed issuing debt.

*Source: Kuwait: Staff Concluding Statement of the 2025 Article IV Mission*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2025/12/18/cs-kuwait-staff-concluding-statement-of-the-2025-article-iv-mission_