Kuwait's new sovereign wealth fund Ciyada to boost foreign investment

DUBAI — Kuwait is set to create a new sovereign wealth fund to develop megaprojects and bring in foreign direct investment to its private sector, with the goal of boosting its economy and making it less reliant on oil, according to government documents made available on Sunday.  

The new Ciyada Development Fund will lead domestic investment projects intended to fuel and diversify Kuwait’s economy, according to government plans shared with Reuters.

The Gulf country already has the Kuwait Investment Authority (KIA) with assets of about $803 billion, according to the Sovereign Wealth Fund Institute. KIA is the fifth-largest sovereign wealth fund globally, with Abu Dhabi’s Investment Authority ahead in fourth place with $853 billion, and the second-largest in the Middle East and North Africa, according to the institute. 

The Ministry of Finance and KIA have been tasked with studying the plans for the proposed fund. No value for the fund or specific projects it will undertake have been revealed. 

KIA has been criticized for letting political involvement hinder its growth and effectiveness in comparison to its Gulf neighbors' more expedited diversification.  

Gridlock between Kuwait's appointed government and elected parliament has slowed down effective economic policymaking, and therefore reform the agenda to lessen reliance on oil.

"Kuwait has witnessed several new governments over the past three years — along with dissolved parliaments and fresh elections. These political disruptions have not supported effective economic policymaking," Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, said in an Al-Monitor PRO memo published in May.

Economic growth has been highly variable in recent years. Gross domestic product (GDP) growth slid to -8.9% in 2020, mainly due to the global coronavirus pandemic, rose 1.3% in 2021 and increased to 8.3% in 2022. The International Monetary Fund predicts that Kuwait's real GDP will fall to 0.9% this year.  

With 7% of the world’s crude reserves, oil accounts for nearly half of Kuwait’s GDP, makes up around 95% of exports and about 90% of government export revenue, according to the International Trade Administration. 

Kristin Smith Diwan, senior resident scholar at the Arab Gulf States Institute in Washington, said the culmination of political inefficiencies have added up, and exacerbated the situation in recent years. 

“In the last decade or so Kuwait has turned more inward due to this repeated kind of political crisis,” Diwan told Al-Monitor in April, when Kuwait announced its new government for the seventh time in three years. That government was dissolved again with a new one appointed in June.