The Kuwait Fund: Small State in the International System

Kuwait FundFounded in 1961, the Kuwait Fund for Arab Economic Development (KFAED) aims, on behalf of the Kuwaiti government, to aid the growth of all developing countries. Unlike the name suggests, the Kuwaiti fund operates both within and beyond the Middle East, making it the first institution of its region to actively participate in international development initiatives. 

The KFAED typically assists by extending concessional loans to fund development projects in agriculture, energy and transport amongst other vital industries that promote social and economic advancement in recipient states. Over the years, the Fund extensively grew its reach and influence to become a prominent actor in international humanitarian assistance, working toward alleviating the conditions of the most vulnerable worldwide. 

A History of Kuwaiti Economic Assistance

Throughout the 1950s, under colonial rule, Kuwait began bargaining for more control over its oil production and wealth and funneling significant amounts to the aid of all seven Sheikhdoms that now constitute the United Arab Emirates (UAE). After its independence, Kuwait was quick to establish the KFAED with the mission of channeling the state’s wealth toward assisting more of its neighboring Arab states. 

The Fund rapidly grew and began investing in projects that would become especially prominent in the Middle East. For instance, KFAED’s eighth loan was directed toward the development of the Suez Canal in Egypt. By 1974, the fund had widened its geographical coverage and became involved in projects across continents, eventually reaching nations across Asia, Africa, South America and Eastern Europe. 

While the fund started as a 50 million Kuwaiti Dinar (KD) initiative, in the span of a decade it became worth 1 billion KD and constituted the world’s largest foreign aid program at the time. The fund also proved to be resilient, as during the 1990 invasion of Kuwait, the KFAED moved its headquarters to London where it remained operational, and was able to return the following year to resume its operations from Kuwait. 

International Humanitarian Aid

The fund has also been quick to respond with humanitarian aid during natural disasters and wars. Figures since 2015 place Kuwait’s foreign aid contribution at more than double the U.N. Official Development Assistance 0.7% commitment target. The fund has also pledged $500 million in humanitarian aid to Yemen and Syria each, making it the third largest donor to Syria since the onset of the war. The KFAED also provided $200 million to Iraq in aid, along with an agreement to postpone $4.6 billion worth of Gulf War compensation owed to it by Iraq. 

The fund took it upon itself to take part in co-finance projects with other national, regional and international partners. The KFAED joined the Arab Coordination Group, and in 2016 took part in the Arab-DAC Dialogue on Development held at the OPEC Fund for International Development. In addition, the KFAED’s scope expanded to include offering grants and subsidies to support development initiatives, with its beneficiaries encompassing both governments as well as other organizations. 

Partnership with the UNDP

In 2021, the KFAED joined the United Nations Development Programme (UNDP) to support individuals and communities affected by crises worldwide. Following the COVID-19 pandemic, the Kuwait Fund signed a partnership agreement with the UNDP to support and build resilience in affected areas while assisting them in achieving U.N. Development Goals in the face of new global challenges. The partnership set out to advance what they termed the humanitarian-development-peace nexus which is primarily aimed at recovery and post-crisis stabilization but also tackles poverty, inequality and climate change. 

As part of the agreement, the KFAED provided funding for the UNDP’s operations across 170 countries to find long-term solutions and implement durable plans and responses. In the joint projects in Iraq, Jordan and Yemen, the fund contributed a total of $16.5 million. The projects specifically aimed to enhance the living conditions of Internally Displaced People, refugees and asylum seekers by providing access to essential health services, shelter, improving water services and installing solar power. Notably, the joint initiative included building and commissioning the Khan Younis wastewater treatment plant, greatly improving public health and access to water for more than 217,000 individuals in the Gaza Strip.

By 2023, the Kuwait Fund had issued more than 1,000 loans across 105 countries. Ultimately, through the far-reaching initiatives of the KFAED, Kuwait has established itself as a key facilitator and supporter of initiatives aimed at enhancing resilience and supporting the vulnerable in the face of the world’s most urgent crises. The agreement between the Kuwait fund and the UNDP then serves to demonstrate further Kuwait’s growing global prominence at the intersection of international humanitarian aid and development.

– Nadia Asaad 
Photo: Flickr