Fitch affirms Kuwait

Fitch Ratings said it affirmed Kuwait's foreign-currency issuer default rating at AA- and local-currency issuer default rating at AA.

The outlook is stable on both ratings.

The agency also affirmed the short-term foreign-currency rating at F1+ and the country ceiling at AA.

"Kuwait's net external creditor position has continued to improve over the past year, lending strong support to the rating," Charles Seville, associate director in the sovereign group at Fitch, said.

The agency also noted the country's low public sector external debt, its improved fiscal revenue as a result of high oil prices and its surpluses in reserve funds. Kuwait's external assets exceed its external liabilities by $86 billion, or 88% of gross domestic product, Fitch said, providing a formidable cushion in the event of a negative shock.

Fitch said it figures the cost of the Kuwaiti oil basket must fall below $10 billion to eliminate the budget surplus forecast for 2007 to 2008 and must fall even further to eliminate the current surplus.

The agency noted, however, that the country's reliance on oil as a single source of revenue is still a concern, particularly because of its potential volatility. Oil accounts for three-quarters of government revenue, and the rest is investment income. What's more, the oil industry makes up more than half of national output. Without greater oil production capacity, the real growth outlook is moderate, Fitch said, adding that the country also faces some geopolitical risks given the regional conflicts.

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