The country ceiling for foreign currency bonds, the local currency ceiling for bonds and the local currency bank deposit ceiling were confirmed at Aa3. The outlook on the ratings is stable.

"The upgrade was the reflection of the confidence in the Kingdom's fiscal as well as in its monetary policy over the last year," Said Al-Shaikh, chief economist at the Jeddah-based National Commercial Bank (NCB) said.

"Despite the global financial crisis, the Kingdom has been able to generate positive growth particularly in the nonoil sector which grew over 3 percent in 2009," Al-Shaikh said.

A return in the budget to a moderate surplus — from an estimated small deficit in 2009 — will restore the Kingdom's debt trajectory back to its former improving trend, even with continued large-scale infrastructure spending, Moody's said in its statement.

The Moody's report said support for the rating comes from Saudi Arabia's banking system. It has demonstrated the ability to absorb and contain shocks emanating from the global financial crisis, Dubai and domestic corporate debt problems. The Kingdom's banking system is only one of a few to have maintained a stable outlook globally during the crisis.

"Saudi Arabia's macroeconomic stability and expected good growth this year as well as foreign assets expected to increase more than 100 percent of the country's GDP with very little debt are key points that make the Kingdom nearly unique in a debt struggling world," John Sfakianakis, group general manager and chief economist at Banque Saudi Fransi, said.

Saudi Arabia is not only one of the fiscally healthiest countries in the G20 but has embarked on the largest spending program in the G20 without the need to generate any public debt, Sfakianakis added.