Borrowing from the Future Generations Reserve: What Decree-Law No. 81 of 2026 Means for Business

On 1 September 2026, Kuwait published Decree-Law No. 81 of 2026 in Supplement 2 to Kuwait Al-Youm Issue 1806. The decree-law amends Decree-Law No. 106 of 1976, the founding law of the Future Generations Reserve, and creates the first legal route for the State's General Reserve to borrow from the fund. It took effect on publication.

Why this matters: the Future Generations Reserve is Kuwait's long-term savings vehicle, managed by the Kuwait Investment Authority (KIA). The explanatory memorandum describes it as one of the largest sovereign wealth funds in the world, and press reports put its assets above one trillion US dollars. Until now, the law barred taking any amount from it. That is why successive budget deficits were charged entirely to the General Reserve, the State's day-to-day account, steadily thinning it out. The new law replaces that all-or-nothing design with a controlled bridge between the two accounts.

What exactly changed

First, a borrowing window with conditions. The Cabinet may authorize a loan from the Future Generations Reserve to support the General Reserve. The decision is taken on the proposal of the minister who chairs KIA's board and only after KIA's own board approves. Each decision must set out the loan amount, its purpose and the return payable to the fund, the term and repayment schedule, and the rules for any rescheduling. In plain terms, the State borrows from its savings on documented, interest-bearing terms, rather than simply drawing the money out.

Second, two hard caps in the new Article (3 bis). Loans taken in a single fiscal year may not exceed 100 percent of the reserve's average realized returns over the last five audited fiscal years. In other words, annual borrowing is sized against what the fund actually earns, not against its capital. Separately, the total stock of outstanding loans may not exceed 10 percent of the fund's net asset value under its latest audited accounts. If either cap is breached, new borrowing is frozen until the ratios return within limits.

Third, creditor-style protections for the fund. Every loan, with its returns, is booked as a debt owed to the Future Generations Reserve. Repayment takes priority from state revenues once the final account shows a surplus. And no loan can be written off or reduced except by a law, which places the fund's claim beyond the reach of ordinary administrative decisions.

Fourth, a housekeeping change with practical value. The annual transfer into the reserve, a percentage of any actual surplus in the State's final account, is now set by the Cabinet on the proposal of the competent minister who chairs KIA's board, applying from the results of FY2018/2019. The memorandum explains that dropping the reference to a named minister avoids amending the law each time KIA's ministerial affiliation changes.

What it means in practice

For the State, this is a liquidity option that sits alongside the public debt programme. We reported in July on Decree-Law No. 74 of 2026, which closed FY2025/2026 with a deficit of about KD 7.14 billion charged to the General Reserve, and on the six billion US dollar sovereign bond that drew an order book of three times its size. The new window lets the treasury smooth its funding needs without selling fund assets at the wrong moment and without leaning solely on debt markets.

For banks, investors and rating analysts, a sovereign that can reach internal liquidity through a published, capped and repayable mechanism is generally a stronger credit story than one facing a binary choice between market debt and an eroding cash reserve. The quality of disclosure will matter: how loan amounts, balances and repayments are reported will shape how much comfort the market takes.

For companies that contract with government bodies, a better-funded treasury reduces the risk of payment delays in tight fiscal years. Suppliers and contractors who lived through past deficit cycles will recognize the practical value of that.

Open questions remain: when the first Cabinet borrowing decision will issue and at what size; how the five-year average of realized returns will be computed and published; and how the mechanism will interact with the debt law and the annual budget cycle.

WEFAQ advises treasury, credit and compliance teams to fold the new mechanism into their sovereign risk analysis, and to treat the first borrowing decision under Article (3 bis) as the key practical signal of how actively the State intends to use the window. Counterparties to long-term government contracts should also watch the final account cycle, which is when the repayment priority is triggered.

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Source: Decree-Law No. 81 of 2026 and its explanatory memorandum; Kuwait Al-Youm Supplement 2 to Issue 1806, pages 3-4, 1 September 2026.

This article is provided for general information only and does not constitute legal advice. For advice specific to your circumstances, please contact WEFAQ Law Firm.