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The legislation enables the inclusion of sukuk in the sovereign financing structure, according to a statement from Finance Minister Yaqoub Al-Refaei. He noted that the move improves financing flexibility while broadening the base of domestic and international investors. The law supports capital market development and enhances the management of financial liabilities in line with fiscal sustainability objectives, Al-Refaei added. It also aligns with efforts to preserve the strength of Kuwait’s financial position.
Faisal Al-Muzaini, director of the public debt department at the Ministry of Finance, described the law as completing the necessary tools for an integrated public debt management strategy. The framework grants the government greater flexibility in managing its debt portfolio through diversification of instruments, markets, maturities and investors, he said. It further strengthens the ability to handle refinancing and liquidity risks while allowing authorities to determine the timing, size and structure of issuances based on financing needs and prevailing market conditions at home and abroad.
Provisions in the 35-article decree-law permit the establishment of a wholly state-owned special purpose vehicle to own and manage underlying sukuk assets, the Ministry of Finance explained. This entity would protect investor rights, collect returns and distribute profits to holders. The law also creates a unified Sharia Supervisory Board and authorises a range of Islamic instruments linked to leased assets, usufructs and operating rights. Sukuk can be issued in Kuwaiti dinars or foreign currencies and listed on local or international markets, with offerings open to citizens, residents and foreign investors, though the government may reserve certain issues for Kuwaiti nationals.
The new legislation connects to Decree-Law No 60 of 2025 on financing and liquidity, which the finance ministry said set a public debt ceiling of KD30 billion and permitted issuance with maturities of up to 50 years. That earlier measure revived Kuwait’s ability to borrow after the previous law expired in 2017, enabling the government to tap global debt markets for the first time in eight years. Finance ministry figures show oil revenues were expected to account for nearly 80 percent of budgeted income in the 2026-27 fiscal year, contributing to a projected deficit of KD9.8 billion that has prompted increased reliance on debt issuance.
Government sukuk would help develop the local debt market and create a sovereign yield curve across different maturities, according to Al-Muzaini. Such a curve would improve pricing efficiency and serve as a benchmark for sukuk issued by companies and financial institutions. The development is expected to deepen the secondary market and enhance liquidity levels over time.
Kuwait has already ramped up borrowing activities, with the Central Bank of Kuwait issuing KD150 million in bonds in May 2026 as part of efforts to address fiscal pressures, ministry data indicates. The total value of local bonds issued since the enforcement of the 2025 debt law has reached several billion dinars, the data shows. Fitch Ratings assessed that the sukuk law could accelerate debt capital market development by broadening access to sharia-compliant funding and increasing participation from Islamic banks and investors.
