JEDDAH, 17 July 2007 — Standard & Poor’s has raised its foreign and local currency long-term sovereign credit ratings on Saudi Arabia to “AA-” from “A+”. At the same time, the local and foreign currency short-term ratings were raised to “A-1+” from “A-1”. The outlook is stable.
Standard & Poor’s also raised the transfer and convertibility (T&C) assessment on Saudi Arabia to “AA+” from “AA”.
“The upgrade primarily reflects Saudi Arabia’s extremely strong and rapidly improving external and fiscal positions,” Standard & Poor’s credit analyst Ben Faulks said in a press statement yesterday.
Brad Bourland, chief economist at Jadwa Investment, told Arab News: “The S&P upgrade appropriately reflects the financial strength of the Saudi government. The size of the government budget surplus and accumulation of official foreign assets at the central bank are among the highest in the world.”
Driven by record oil receipts, foreign reserves and liquid foreign assets have increased sharply in recent years.
They are expected to top SR1.24 trillion ($330 billion) by the end of this year, compared to SR510 billion ($136 billion) in 2004. This will be sufficient to cover about 26 months of current account payments (including private transfers). Overall, the Kingdom stands to have a net external asset position of 115 percent of GDP by end 2007.
According to Saudi Arabian Monetary Agency’s monthly bulletin for April 2007, Saudi Arabia’s total assets grew from SR542.77 billion in 2001 to SR1.53 trillion at the end of 2006. Saudi Arabia’s assets at the end of April 2007 stood at SR1.62 trillion.
Saudi Arabia’s total official reserves minus gold reached SR27.52 billion in 2006 compared to SR26.53 billion in 2005 and SR17.59 billion in 2001.
S&P had previously raised its long-term foreign currency credit rating of Saudi Arabia from “A” to “A+” on the basis of the country’s excellent financial performance.
The rating agency also affirmed in April its long-term local currency rating at “A+” and short-term sovereign credit rating at “A-1”.
S&P also announced in April that the decline in first-quarter profits of Saudi banks would not affect the firm’s high credit ratings for the sector.
Another international rating agency Fitch announced in May that Saudi banks’ profit growth is expected to be moderate in 2007, but at sustainable levels, amid lower stock market-related earnings and a slowdown in consumer loans.