Saudi Arabia’s economy has been handed a boost after international credit rating agency Fitch upgraded its grade for the Kingdom to A+.
The increase was attributed to Saudi Arabia’s strong financial position, favorable debt-to-gross domestic product ratio, and secure sovereign net foreign assets.
Fitch added the improved rating is conditional on Saudi Arabia’s continuous commitment to steady progress with fiscal, economic and governance reforms.
The rating rise directly followed the Kingdom’s surprise announcement of oil production cuts, along with other members of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, which led to a spike in global prices.
The report said: “The upgrade of Saudi Arabia’s ratings reflects its strong fiscal and external balance sheets, with government debt/GDP and sovereign net foreign assets (SNFA) considerably stronger than both the ‘A’ and ‘AA’ medians, and significant fiscal buffers in the form of deposits and other public sector assets.”
The Fitch report went on to warn of potential pitfalls, pointing out that despite government efforts to diversify the economy and enable the non-oil sector, Saudi oil revenue will make up around 60 percent of total budget revenue in 2023-2024.
“Oil dependence, weak World Bank governance indicators and vulnerability to geopolitical shocks remain relative weaknesses, although there are some indications of improvement in these factors,” said the agency.
The Kingdom’s fiscal breakeven price in 2022 hit $86 per barrel.
Brent crude priced over $85 per barrel on Wednesday, days after oil production cuts when it was near $80 per barrel.
In 2022, it recorded its first budget surplus in a decade, reaching SR103.9 billion ($27.68 billion), as higher oil prices boosted government revenues by 31 percent.—AN
