The above indicators unveil the Central Bank of Kuwait’s prudent policy and proactive approach that helped banks to weather one of the most difficult economic crises from a position of strength, and continue providing their services efficiently. Having considered the positive results and resilience of the banking sector, the Central Bank of Kuwait decided to lift restrictions and lay down a map to redirect its regulatory mitigants to prepandemic thresholds. Notwithstanding the banking sector’s sound indicators, high liquidity ratio and strong solvency, the estimated liquidity and solvency ratios above the minimum regulatory thresholds, and outlook of healthy growth, the Central Bank of Kuwait decided to gradually unwind the regulatory mitigants in line with the IMF recommendations. The first phase of our 2-phased transition began early 2022 by withdrawing 50% of the regulatory mitigants. The second phase of withdrawal process shall be completed early 2023 to return to the previous pre-crisis regulatory thresholds. Meanwhile, we shall still support small and medium enterprises by maintaining the same risk weight, and closely monitor the performance of the banking sector and conduct stress testing on its various units. Though the Central Bank of Kuwait is satisfied of the resilience of the banking and financial sector in the State of Kuwait, the developments recently seen in the world and the evolving risks surrounding the prospects of the global economy drive our efforts to protect our economy and banking and financial sectors from external shocks through proper monetary policies and supervisory measures.

It is understood that the previous mitigants and supporting measures taken by central banks, including the Central Bank of Kuwait, are were to survive coronavirus induced health/economic crisis, and had been unwound once they were no longer needed. The challenges and risks seen today differ from those we experienced during the past two years, and require attention, monitoring of their impacts on our economy and banking and financial sectors, and applying the appropriate measures and policies to face them. Among such risks is deceleration of the global economic growth. IMF forecasts in July indicated a decline in growth to 3.2% in 2022 and 2.9% in 2023, driven by several shocks, most notably is deceleration of the American and Chinese economies, Russian-Ukrainian conflict, the geopolitical risks in Southeast Asia, the elevating tensions between China and Taiwan, continued supply and demand imbalance as a result of disruption of supply Page 3 of 4  chains of many basic commodities (mainly food and energy), risks of the continuous rise in global commodity prices and decade-old high inflation rates, especially in USA and major European economies. To contain the prolonged and far-reaching rise in inflation rates, many central banks tightened their monetary policies, by withdrawing the stimulus packages they had taken to withstand the negative impacts of the pandemic, reduced asset purchase programs, and increased interest rates. Such actions are expected to result in inevitable economic costs and we, however, hope that these would not adversely affect our economic sectors, banking and finance in particular.