Saudi credit boost as oil prices rocket

CREDIT BOOST: Fitch has upgraded Saudi's sovereign ratings on the back of record oil prices. (Getty Images)

Fitch Ratings on Wednesday upgraded Saudi Arabia's sovereign ratings on the back of record oil prices, but warned a sharp correction in the market could threaten its creditworthiness.

The ratings agency upgraded Saudi's long-term local and foreign currency issuer default ratings (IDRs) to 'AA-' from 'A+'. The outlooks have been revised to stable from positive, it said.

The country ceiling has also been upgraded to 'AA' from 'AA-' and the short-term IDR has been upgraded to 'F1+' from 'F1', Fitch said.

"At today's oil prices, Saudi Arabia is earning around $1 billion a day from oil exports, reinforcing an already strong external balance sheet and creating a buffer against future shocks," Charles Seville, associate director in Fitch's sovereign team, said in a statement.

The agency said Saudi's main credit strengths were its very low indebtedness and large domestic and external assets.

General government debt, all of it domestic, fell to 7.2 percent of GDP at end-2007, while the wider public sector, represented mainly by profitable state-owned firms, has little external debt, it added.

Fitch said the kingdom's overwhelming dependence on oil - 90 percent of central government revenue comes directly from oil - left it exposed to a sharp drop in oil prices.

However, Fitch added that the government budgeted cautiously and could withstand oil prices as low as $30 a barrel for several years, without major spending adjustments, thanks in part to the Saudi's sizeable domestic and external assets, and capacity to borrow.

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM