A Decree Ends Decades of Off-Limits Status
Kuwait's Cabinet has issued a decree amending a 1976 law to let the state borrow from its Future Generations Fund, opening access to a sovereign wealth pool worth more than $1 trillion for only the second time in the fund's history, according to Briefs and Xinhua.
Under the decree, money borrowed from the fund — which is managed by the Kuwait Investment Authority — is channelled into the General Reserve Fund, the state's treasury account used to finance day-to-day government spending. Each individual loan must specify its amount, purpose, expected return, repayment period and repayment schedule, and requires approval from the Cabinet before it can be drawn, according to Xinhua. The two funds have long served distinct roles in Kuwait's public finances: the General Reserve Fund covers ordinary budget needs, while the Future Generations Fund was built to be set aside from that cycle entirely.
That separation is what made the fund effectively off-limits to routine government financing since its creation. Kuwait had tapped it only once before the new decree: after Iraq's 1990 invasion and occupation of the country, according to Briefs. That single episode, more than three decades old, remains the sole precedent for what the Cabinet has now turned into a standing, if tightly bounded, financing option available in ordinary times as well as emergencies.
How the New Borrowing Is Capped
The decree does not hand the government open-ended access to the fund. Instead, it sets three binding limits designed to keep any borrowing tied to the fund's own scale and performance rather than the state's appetite for spending, according to Briefs and Xinhua:
- Annual borrowing cannot exceed the fund's average returns over the previous five audited fiscal years
- Total outstanding loans are capped at 10% of the fund's net asset value, after which no further borrowing is permitted
- Loans cannot be written off without a new law passed specifically to allow it
Each of the three limits works to keep the borrowing tethered to the fund's own performance and size, rather than to the state's financing needs in a given year. Capping annual draws to the fund's five-year average return means Kuwait can only borrow what the fund itself has been generating, not draw down its principal to cover a shortfall. The 10% ceiling on outstanding loans against net asset value performs a similar function at the aggregate level, and the bar on write-offs without fresh legislation means any amount borrowed stays a liability on the state's books rather than becoming, in effect, a transfer.
Bader Al-Saif, an assistant professor at Kuwait University and an associate fellow at Chatham House, framed the decree as part of a wider recalibration of the state's fiscal options rather than a one-off fix:
Kuwait needs to assess its standing, assets, tools and expand its range of possibilities amid this shaky geopolitical climate. — Bader Al-Saif, assistant professor, Kuwait University; associate fellow, Chatham House
Al-Saif's comment reflects a debate playing out beyond Kuwait's Cabinet room: how far a state can lean on wealth built for future generations without eroding the principle that made the fund untouchable in the first place. The 10% and five-year-average caps are the government's answer to that debate — a way of using the fund without treating it as an ordinary source of revenue.
A Sharper Economic Backdrop
The decree lands against a deteriorating growth outlook. A Bloomberg survey of bank economists, conducted in mid-June 2026, projected Kuwait's economy would contract 7.9% in 2026, a sharp reversal from a prior forecast of 3.7% growth, according to Times Kuwait. The survey cited Kuwait's sensitivity to disruption in regional energy markets, shipping routes and trade activity tied to the war between the United States and Iran.
A swing of that size — from an expected expansion to a contraction approaching 8% within the space of months — narrows the set of conventional tools available to a government before more structural options like a long-protected sovereign fund enter the conversation. Kuwait is far from alone among Gulf states in facing this kind of downgrade; what distinguishes its response is that it has chosen to formalise a borrowing channel against the fund rather than rely solely on debt issuance or drawdowns of more liquid reserves.
Why Cairo Is Watching
Kuwait's fiscal manoeuvring is being followed outside its own borders, including in Egypt. Kuwait, alongside Saudi Arabia and the UAE, has historically supplied close to half of all remittances sent home by Egyptians working abroad, according to AGBI.
Continued strain on Kuwaiti state finances is therefore watched in Cairo less as a headline about a $1 trillion fund and more as a signal about the wider Gulf's capacity to keep absorbing Egyptian labour and sending home the hard currency that Egypt's balance of payments depends on. Egyptian workers across the Gulf send substantial sums home each year; pressure on the budgets of the states that host them is, by extension, pressure on one of Egypt's largest sources of foreign currency income.
Kuwait's decree opens one specific, capped channel inside one specific fund; it does not by itself resolve the wider budget pressure described in the Bloomberg forecast. Whether other Gulf sovereigns facing similar strain on trade and energy revenue move toward comparable arrangements of their own is, for now, an open question rather than a trend confirmed by a single country's decision.