The Central Bank of Kuwait said on Wednesday it had cut its key discount rate by 125 basis points to strengthen the economic environment in the Gulf state amid a global credit crunch.

The central bank cut the benchmark discount rate to 4.50 percent from 5.75 percent and also lowered the repo rate to 2.50 percent from 3.50 percent.

"The decision to cut the discount rate comes from the central bank's keen follow up of local, regional and international developments and is basically related to the crisis sweeping the international money markets and the need to strengthen the local environment," Central Bank governor Sheikh Salem Abdul-Aziz Al-Sabah said in a statement.

In January, Kuwait cut its benchmark dinar discount rate, which banks use to set lending rates, and the repurchase rate by 50 basis points after a US rate cut. - Reuters