Weekly GCC news to 19 July

• PIF signed agreements with three Chinese renewable firms to establish local manufacturing.
• Bond issuance is planned to refinance the $13bn bridge loan for Aramco Gas Pipelines.
• Masdar issued $1bn in 5-10 year green bonds.
• A UAE government reshuffle included appointing Dubai’s crown prince as a deputy prime minister.
• Senator Bob Menendez was convicted of taking bribes from US developers, including one for whom he engaged with a Qatar investor.
• Kuwait’s non-oil growth soared to 4.7% in Q1, but was largely a base effect from weak manufacturing a year ago.
• Kuwait’s General Reserve Fund liquid assets have fallen to under 4% of GDP.
• Kuwait’s finance minister warned that without fiscal reforms, its breakeven oil price could rise to $109 by 2028. [see (1) below]
• Kuwait made a major offshore oil and gas discovery, boosting its reserves by about 3%.
• Oman sold a 5-year local development bond at 5.1%.
• Islamic State gunmen killed 6 people at a Shia mosque in Muscat. [see (2) below]
• Israel launched a massive strike in Gaza targeting Hamas’s military chief, Mohammed Deif.
• The UAE indicated willingness to participate in a post-war international security mission in Gaza.
• The ICJ ruled that Israel must evacuate its settlements and make reparations to Palestinians.

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Here are two brief snippets from the report:

(1) Kuwait's finance minister calls for fiscal reform

• The Minister of Finance, Anwar Al-Mudhaf, spoke at the General Budget Forum (TK).
• He gave a rare update on the size of the General Reserve Fund, which has been used to finance deficits in recent years, given the lack of a debt law stating that its liquid reserves had declined to less than KD2bn (4% of GDP) at the end of the fiscal year in March, compared with KD34bn a decade ago.
• He presented business-as-usual projections that showed the fiscal breakeven price rising to $109 by 2028/29, when the deficit would be -15% of GDP with oil at $75, which was presented as a warning to take corrective action.
• He said expenditure should be fixed at the current budgeted level of KD24.5bn through to 2027/28. This would require bringing the largest item, salaries, under control. He noted that public salaries comprise 30% of GDP in Kuwait, compared with just 7-13% in other Gulf states.
• He said non-oil revenue needs to be doubled to KD4bn within three years and be increased from 4% to 10% of revenue, something that would require new tax measures, such as VAT, which in the past have faced opposition in the National Assembly (which is currently suspended for up to four years).

?(2) Islamic State attacks mosque in Muscat

• An Islamic State attack killed six people on Monday at a Shia mosque in Wadi Kabir, an eastern suburb of Muscat (TO, Rt).
• The gunmen were three Omani brothers, who were killed by security forces. They opened fire during an Ashura service, killing five worshipers, of Indian and Pakistani nationality, and a police officer. Dozens were wounded. The Pakistani ambassador said the attack would have been even worse without the swift action of the police (TO). Islamic State previously attacked Shia mosques in Kuwait and Saudi Arabia in 2015.
• This is the first Islamist terrorist attack in Oman, which has been an extremely peaceful country since the end of the Marxist Dhofar Rebellion in 1976. It has a strong tradition of religious tolerance. The majority of Omani nationals follow the Ibadi school of Islam, which is almost unique to Oman, while others are Sunnis, particularly in the south. There is also a small community of Shia Omans, as well as some Hindus. Expats span a wide range of faiths.
• This appears to be a one-off attack by a radicalized family and there is no evidence currently that Islamic State has a wider network in Oman or the ability to carry out further attacks.
• The main economic concern is that the attack could discourage tourism, an important part of the non-oil economy that has significant growth potential. However, the fact that the target was a local mosque well away from tourist areas should mitigate those concerns.