Fiscal deficits will likely remain in the double digits in the medium to long term and lead to a gradual, but steady deterioration of Kuwait's balance sheet strengths, it said.
The 106.6 trillion yen ($1.03 trillion) annual budget also got a boost from record military and welfare outlays. It marked a 4% rise from this year's initial level, rising for nine years in a row, with new debt making up more than a third of revenue.
These issues could affect the region's economic recovery and cause "weakness in property tax values that will not be evident until fiscal 2023," S&P's Wittstruck said.
Double-digit inflation and depleted FX reserves "would significantly increase the chances" of a formal interest rate hike by year end.
The lira slid as much as 1.7% to a record low of 8.56 versus the dollar, despite the greenback's weakness as votes were still being counted in Tuesday's tight US election.
Latin America's No. 2 economy is facing the deepest recession in decades. Its sovereign bonds are edging closer to a downgrade to speculative grade, or junk.
"Fitch expects the financial pressure on Mexican insurers and surety companies will persist at year end 2020.