ISTANBUL

Fitch Ratings said Friday it had affirmed Kuwait's long-term foreign currency issuer default rating at AA- with a stable outlook.

The rating agency said Kuwait's rating is supported by its strong fiscal and external balance sheets.

Those factors, however, are balanced against weaker governance compared to its peers, its heavy dependence on oil, its generous welfare system, and large public sector that could be challenging to sustain in the long-term, said Fitch.

"We expect revenue to continue to decline, even as non-oil revenue rises modestly. Oil revenue loss from lower oil prices is partly mitigated by the potential unwinding of OPEC+ oil production quotas from 4Q24," it said in a statement.

Fitch warned that a significant deterioration in fiscal and external positions, due to a sustained period of low oil prices, could lead to a rating downgrade.

Kuwait's rating could be upgraded if its institutions and political system are able to tackle long-term fiscal challenges through actions to implement a clear deficit reduction plan that is resilient to lower oil prices.