Kuwait wealth fund in talks with KPC on $20bn-plus dividends

KUWAIT: Kuwait's sovereign wealth fund is negotiating with state-owned Kuwait Petroleum Corporation (KPC) a new payment schedule for more than $20 billion in accrued dividends, two sources said, as the Gulf state seeks ways to counter a liquidity crunch.

KPC has owed for years about 7 billion Kuwaiti dinars ($23.14 billion) in dividends to the General Reserve Fund (GRF), one of Kuwait's sovereign funds.

GRF and KPC agreed in recent years a repayment schedule, but GRF now wants to review it and accelerate it as part of government efforts to cover the deficit, said the sources.

"KPC is suffering due to low oil prices and the government has a liquidity problem. KPC wants as long as possible to return the money, and the government wants the largest amount possible," said one of the sources.

The discussions around KPC's 7 billion dinars - which the finance ministry had already claimed last year - are aimed at reaching an agreement that would not impact KPC's cash flow, the two sources said.

KPC and Kuwait Investment Authority, which manages GRF, did not immediately respond to comment requests.

The oil-rich Gulf state, hit hard by lower oil prices and the COVID-19 pandemic, faces near-term liquidity risks, largely because parliament has not authorised government borrowing.

The negotiations are the latest of several attempts by Kuwaiti authorities to bolster government coffers despite the borrowing ban - the result of a continued standoff between parliament and government which is deadlocking structural reforms in the heavily oil-dependent country.

Ratings agency Fitch last month downgraded its outlook on Kuwait's sovereign debt rating to "negative" from "stable".

"Without passage of a law permitting new debt issuance, the GRF could run out of liquidity in the coming months without further measures to replenish it," Fitch said.