By Hossam Al-Alameddine
The Kuwaiti economy is undergoing a crucial transformation as authorities implement long-awaited financial and economic reforms aimed at developing non-oil sectors and diversifying revenue streams, according to Global Finance magazine.
In a detailed report on Kuwait’s economy, the magazine noted that the government has approved the 2025-2026 budget, which is expected to record an 11% increase in the deficit due to a slight decline in revenues. As Kuwait struggles to diversify its economy and reduce its dependence on oil production, these reforms mark a significant shift in the country’s financial strategy.
Economic Reforms and Investment Climate
Khaled Yousef Al-Shamlan, CEO of Kuwait Finance House, emphasized that economic reforms in Kuwait are paving the way for significant opportunities for financial institutions. Initiatives aimed at enhancing the business environment—such as public-private partnerships in major projects and the simplification of regulatory frameworks—are expected to facilitate greater investment inflows into Kuwait.
Similarly, Ahmad Al-Duwaisan, Acting CEO and General Manager of Corporate Banking at Al Ahli Bank of Kuwait, stated:
“We now have full confidence in the government’s commitment to reforms. We can see concrete steps being taken to implement economic and financial changes.”
Structural Economic Changes
The report highlighted major structural changes that could reshape Kuwait’s economic landscape, including reductions in public sector allowances and subsidies—currently accounting for 80% of total government spending—along with the introduction of a value-added tax (VAT) and an updated mortgage law. Additionally, discussions are underway regarding new legislation such as a sovereign debt law, allowing Kuwait to borrow from international markets.
The approval of key economic laws signals strong momentum for financial reforms. One significant development is Kuwait’s adoption of a 15% corporate tax on foreign companies earning over $750 million, in alignment with the Organization for Economic Co-operation and Development’s (OECD) global minimum tax rules.
Ali Khalil, CEO of Markaz (Kuwait Financial Center), noted that aligning with international tax standards will enhance Kuwait’s global tax credibility and reduce its perception as a tax haven. He added that these changes are expected to attract more sustainable and higher-quality foreign direct investment (FDI). The additional tax revenues will likely be reinvested in Kuwait’s non-oil economy, particularly in infrastructure development.
Infrastructure Development and Economic Growth
Global Finance reported that infrastructure development is a key government priority, with plans to renew road networks through $1.3 billion in maintenance contracts. Additionally, Kuwait has ongoing projects worth $121 billion, a positive sign for Kuwaiti banks, as increased capital expenditure will drive economic recovery and growth, consequently boosting lending activity.
Al-Duwaisan highlighted that Kuwaiti banks must take advantage of newly launched projects, stating:
“Our bank has secured a fair share of financing for new projects, and we maintain strong financial coverage across multiple sectors, including infrastructure and energy.”
Similarly, Al-Shamlan noted the significant growth potential in infrastructure and energy, which remain vital to the global economy, particularly in oil, gas, and related services.
Khalil added that ongoing reforms aimed at deepening capital markets and improving liquidity have increased Kuwait’s visibility among foreign investors. This has allowed asset managers to launch new financial products, such as exchange-traded funds (ETFs) and real estate investment trusts (REITs), which were previously unavailable in the Kuwaiti market.
Despite these advancements, Kuwait’s financial market has yet to experience the wave of initial public offerings (IPOs) seen in other Gulf countries. Additionally, deal-making activity in Kuwait remains subdued. Measures aimed at encouraging family-owned businesses to list on the stock market, privatizing state assets, and other incentives could play a crucial role in developing Kuwait’s financial sector.
Looking Ahead
According to Global Finance, economic and financial reforms are finally materializing in Kuwait after years of delays. The government’s efforts to modernize its financial framework and accelerate project execution demonstrate its commitment to long-awaited economic changes—reforms that experts argue are crucial for reducing the nation’s dependence on oil revenues.
The magazine added that Kuwait’s push for reforms is increasingly bolstering investor confidence. However, more work is needed to support and expand the private sector, which is essential for reducing the state’s reliance on oil revenues—especially as the government plans to significantly increase oil production in the coming years.
