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Kuwait issued Decree-Law No. 81 of 2026 on September 1 amending provisions of the 1976 law on the Future Generations Reserve to create a formal mechanism for borrowing from the fund in order to support the General Reserve Fund. The explanatory memorandum published in the official gazette Kuwait Today described the changes as necessary to strengthen legal protections for the reserve while enabling exceptional access under tight controls. Borrowing requires prior approval from both the Council of Ministers and the board of directors of the Kuwait Investment Authority with each loan detailing its amount purpose repayment period and returns. The decree mandates that principal and accrued returns on any such loan be recorded as an asset owed back to the Future Generations Reserve.
Under the amended rules total borrowing in any single fiscal year may not exceed 100 percent of the reserve’s average returns across the previous five audited fiscal years while the cumulative outstanding loan balance cannot surpass 10 percent of the fund’s net asset value from the prior year’s audited statements. The legislation prohibits any new loans if either threshold is breached and borrowing can resume only after compliance is restored. These ceilings aim to safeguard the fund’s core purpose of preserving national wealth for future generations according to the published memorandum.
The measure comes as Kuwait faces prolonged economic pressure from the regional conflict between the United States and Iran that has repeatedly closed the Strait of Hormuz and curtailed oil exports for weeks at a time. Independent Arabia reported that the hostilities have driven a projected 7.9 percent contraction in the Kuwaiti economy this year while pushing the fiscal deficit higher after oil production fell sharply due to full storage tanks. Kuwait last accessed the Future Generations Fund in 1990 following the Iraqi invasion at which time fresh legislative approval was also required.
The Kuwait Investment Authority oversees both the Future Generations Fund and the General Reserve Fund with the bulk of assets held in the former for long-term investment horizons. S&P Global Ratings estimated in a May assessment that the authority’s liquid assets will exceed 550 percent of GDP in 2026 among the strongest such ratios for any rated sovereign. The agency noted that these holdings continue to grow in dollar terms through 2029 despite expected fiscal deficits and provide significant capacity to buffer volatility from the conflict.
Fiscal accounts for the year ended March 2026 recorded a deficit of 7.14 billion dinars or roughly 23 billion dollars as oil revenues dropped Bloomberg reported. The government has issued substantial local and international debt this year maintaining a public debt-to-GDP ratio near 17 percent while the Central Bank eased key bank liquidity ratios to support sector stability. Additional debt sales and the new borrowing option from the sovereign fund are intended to preserve liquidity without rapid depletion of reserves.
Bloomberg indicated that the decree specifically targets support for state finances as Gulf economies absorb the war’s effects on production and trade routes. Repayment of any loans drawn must occur with priority once budget surpluses materialize under the amended law. The Kuwait Investment Authority’s assets which exceed 1 trillion dollars overall have grown organically since 2018 largely through reinvested returns according to rating agency analysis.
