Barrak, 61, was freed from prison on Friday after serving a two-year sentence for insulting the emir of Kuwait in public, a charge he had denied.
The former lawmaker told thousands of supporters at a rally Monday that the emirate had reached "the lowest point in its modern history".
"Kuwait is headed to catastrophe in all fields... It is so close to becoming a failed state," Barrak said.
He called on the government led by the ruling Al-Sabah family to initiate talks to achieve compromise in the Gulf state which has suffered of bitter political disputes in the past decade.
"If the government makes a serious step towards political reforms, we are ready to make many steps," Barrak said.
He said that no one in the opposition was trying to overthrow the regime.
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"No one disputes the constitutional legality of the Al-Sabah family," he said.
But Barrak said that for reconciliation to succeed, the government must reinstate revoked citizenships of opposition figures and scrap all freedom-curbing legislation issued in the past few years.
He also demanded amnesty for all activists, that the judiciary should be allowed to handle citizenship cases and called for cleaning security agencies of "corrupt" elements.
As a result of lingering political disputes between the government and opposition groups, parliament has been dissolved seven times since 2006, the last of which was in October.
Between 2011 and 2014, Kuwait witnessed violent street protests led by the opposition, demanding democratic reforms and an elected government.
Under Kuwait's political system, the prime minister has always been a senior member of the ruling family appointed by the emir regardless of the outcome of an election.
Dozens of opposition activists are either in jail or are facing trial for insulting the emir, including via social media.
The emirate is widely viewed as a pioneer in operating a parliamentary system among the Gulf monarchies.