JEDDAH, 9 May 2004 — The recent “excellent” ratings given by Standard & Poor to Saudi Arabia reflect the strength of the Kingdom’s economy and reaffirm the success of its economic reforms, says Finance Minister Dr. Ibrahim Al-Assaf. Standard & Poor’s Ratings Services said last month it had affirmed its ‘A/A-1’ foreign currency and ‘A+/A-1’ local currency sovereign credit ratings on the Kingdom. The outlook is stable, it added.
“This rating comes from a reputable international institution, known for its credibility,” the Saudi Press Agency quoted the minister as saying. “The rating is based on information received by the institution on the Kingdom’s economic and political situation,” he added.
According to Standard & Poor’s credit analyst, Ala Al-Yousuf, the ratings on Saudi Arabia reflect the government’s favorable balance and net asset position and strong external liquidity.
“The government’s balance shows surpluses estimated at 6.7 percent and 3.8 percent of GDP in 2003 and 2004, respectively, swinging into deficits of about two percent during 2005-2007 largely because of projected softening of oil prices,” said Al-Yousuf. “Furthermore, its net asset position is expected to remain broadly stable at about 50 percent of GDP in the medium term. Underlying this, the government’s gross debt is expected to remain about 22 percent of GDP, as future borrowing needs will be largely met by autonomous government institutions such as the pension funds,” he said.
Al-Assaf also said that the S&P’s ratings refuted negative reports on the Kingdom’s economic and political stability. “S&P’s ratings are well-balanced as they show the positive factors and points of strength in the Saudi economy while underlining the points of weakness that can be tackled,” said Dr. Muhammad Al-Jasser, deputy governor of the Saudi Arabian Monetary Agency (SAMA).
The stability of the riyal exchange rate and the good performance of the banking sector are some positive factors. The high dependence of oil and the inability to accommodate Saudi manpower in the private sector are among the negative ones, he pointed out.