The Public Institution for Social Security, Kuwait’s US$124 billion state pension fund, has published record-breaking profits for the first half of the year, marking a recovery from a corruption scandal just years earlier.
Between January and June, profits for the pension fund rose by 362% to $12.1 billion. Profits rose even higher between April and June, increasing by 611%.
In 2017, the fund installed a new management team to revamp both its finances and its governance structure.
The pension fund, which holds stakes in two US hedge funds Oak Hill Advisors and TowerBrook Capital Partners and US private equity firm Stone Point Capital, has since reorganised its portfolio and in August stated its intention to increase its allocation to real estate, private equity and infrastructure assets.
However, the pension fund’s boost in profits is in contrast to the state’s public finances. The effect of the coronavirus pandemic plus a drop in oil prices have created a significant budget deficit ($12.83 billion for the fiscal year ending March 2020) and led the country’s audit body to call for more borrowing and economic reforms.
The State Audit Bureau has also recommended that the annual transfer of 10% of state revenues to Kuwait’s largest reserve fund, the Future Generations Fund, be halted.
“Given the sensitive conditions in the state’s public finances, low oil prices, declining revenues, worsening deficits expected in the fiscal year 2020/2021, and efforts being made to confront the coronavirus pandemic, there is no other way but for the state to provide other new resources, including borrowing, but under the presence of controls and a package of financial, economic and legislative reforms,” the audit agency said in a report.
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