Fitch Ratings today upgraded Saudi Arabia’s credit rating by one notch to A+. The rating outlook is stable, indicating that Fitch does not anticipate a further downgrade in the foreseeable future.
The Impact of Oil Prices
Saudi Arabia is the world’s largest oil exporter. Fitch’s upgrade came just days after Saudi Arabia, along with other members of the OPEC+ group of major oil producers, announced surprise production cuts, leading to a sharp rise in oil prices.
According to Fitch, revenues from oil sales will account for about 60 percent of Saudi Arabia’s total budget revenues this year and next, although the government is trying to accelerate the development of other sectors.
Fitch identified oil dependence as one of Saudi Arabia’s weaknesses. However, it noted that the share of oil revenues in total budget revenues has fallen from 90 percent a decade ago. Last year, thanks to higher oil prices, Saudi Arabia posted a budget surplus for the first time in almost a decade, to the tune of 103.9 billion riyals (almost CZK 600 billion).
Importance of credit rating
The credit rating is an important guide for investors, as it shows them the likelihood of proper loan repayments. It has a significant impact on the willingness of lenders to lend to the state or other entity concerned, as well as on the terms of the loan, such as the interest rate. The higher the rating, the better the borrower is perceived in the eyes of lenders and the more likely it is to be able to secure cheaper loans.
Source: ČTK
