According to a report by CI Capital, the Kuwaiti government plans to borrow KWD 3-6 billion ($10-20 billion) in the 2025/26 fiscal year to address a growing budget deficit. This borrowing will be done through both conventional and Islamic financial instruments.

The report attributes the widening deficit—expected to hit KWD 3.8 billion in FY 2025/26, up from KWD 1.2 billion—to weaker oil revenues. This move to finance the deficit through borrowing is aimed at protecting the country’s general reserve fund.

Key points from the report include:

• Borrowing: The government’s ability to borrow up to KWD 30 billion over 50 years, approved by a debt law in March 2025, will allow it to fully finance the deficit.

• Economic Outlook: Kuwait’s real GDP is forecast to grow by 0.2% in 2025, ending a two-year contraction. This growth is driven by a 2.1% increase in the non-oil sector.

• Oil Sector: Oil GDP is expected to rebound to 2.6% in 2026 as crude production recovers. Kuwait Petroleum Corporation plans to increase production to 4 million barrels per day by 2035, indicating a positive long-term outlook for the sector.

• Consumer Spending: Despite the positive economic forecasts, consumer spending dropped by 5.3% in the first quarter of 2025. This decline is linked to higher borrowing costs and limited government wage spending. However, the report predicts a recovery as new project activity creates more jobs.

• Inflation: Stable inflation, which was 2.4% in the first half of 2025, is also expected to support real incomes and help boost consumer activity.