By Daniel Bases
NEW YORK Oct 29 Fitch Ratings put Kuwait on
warning that a further escalation of political protests there
could put its AA sovereign credit rating under pressure for a
downgrade despite the nation's strong balance sheet.
On Monday, the credit rating firm said recent popular
protests over a change in the election law decreed by the ruling
emir "suggests a radicalisation of the political scene".
"Prolonged political stalemate could also undermine Kuwait's
rating through its impact on the economy," Fitch said in a
statement. The rating has a stable outlook.
Sheikh Sabah al-Ahmad al-Sabah dissolved parliament in early
October to pave the way for a new election which many hoped
would end a persistent political turmoil that had held up
development projects in the major oil producer and U.S. ally.
The move by the emir on Oct 19, condemned by opposition
political leaders who won a parliamentary majority in a February
poll, was seen as an attempt to undermine their chances ahead of
the Dec. 1 vote.
The crisis escalated in June this year when the nation's top
court annulled the last election which had been held in
February, reinstating the previous, more government-friendly
Opposition lawmakers feared authorities would try to push
through new voting rules that could help pro-government
OPEC producer Kuwait's oil wealth and a generous welfare
state have helped it avoid the kind of "Arab Spring" protests
that toppled leaders elsewhere in the region, but the ruling Al
Sabah family is facing an unprecedented challenge to its
"Kuwait's sovereign external balance sheet is the strongest
of all Fitch-rated countries and means the country's 'AA'
sovereign rating can endure further political instability.
However, a serious escalation of public unrest could threaten
the rating. Much will depend on how the authorities respond, and
whether large-scale violence is avoided," Fitch said.
Last week the government banned gatherings of more than 20
people and gave police more powers to disperse protests,
according to a cabinet statement carried by local newspapers.
This follows the use of tear gas, stun grenades and smoke
bombs by police against thousands of demonstrators who marched
in downtown Kuwait City on Oct. 21.
Kuwait's rating is underpinned by its strong sovereign and
external balance sheet, Fitch said, citing estimated net foreign
assets of $323 billion at the end of last year. That is
equivalent to 191 percent of gross domestic product.
Standard & Poor's rates Kuwait's sovereign credit at AA
while Moody's Investors Service has an equivalent Aa2 rating.
Both have stable outlooks on the credit.