(Adds KFH chairman on banks' investment capacity, context)
KUWAIT, March 9 (Reuters) - Kuwait is talking to advisers about a potential sovereign bond issue, and is considering both domestic and international bond issues, finance minister Anas al-Saleh said on Wednesday.
Saleh, speaking to reporters on the sidelines of a financial conference, didn't elaborate. The government has begun drawing down its financial reserves to cover part of a budget deficit caused by low oil prices, but it also wants to begin issuing debt to limit the speed of the drawdown and develop the local financial market.
Hamad Abdulmohsen al-Marzouq, chairman of major banking firm Kuwait Finance House, told the conference that the government had requested a report from local banks on their ability to finance the deficit, and on whether there was enough liquidity in the banking system.
The local banks then submitted a study to the finance ministry and central bank, estimating the banks had the capacity to finance between 3 billion and 5 billion dinars ($10 billion to $16.7 billion) over the next three years, Marzouq said.
The ministry projected in January that the government would run a deficit of 12.2 billion dinars in the next fiscal year starting on April 1, nearly 50 percent higher than the deficit estimated for the current year, after contributions by the government to the sovereign wealth fund. (Reporting By Hadeel Al Sayegh; Writing by Tom Arnold and Andrew Torchia)