Saudi Arabia's fiscal position remains strong, but high oil dependency is key credit challenge, said the global rating agency Moody's on Friday.
Moody's said that Saudi Arabia's A1 rating and stable outlook are supported by strong "but weakening" fiscal position, high levels of external liquidity and the Kingdom's large oil and gas reserves at low production costs.
The report said that credit challenges include the economy's high dependence on oil, a rigid government spending structure and government revenues that are vulnerable to oil price volatility.
"Although the fall in oil prices pushed Saudi Arabia's budget balance into large deficits, eroding the government's reserves and prompting the government to issue bonds on the international market for the first time in 2016, the country's fiscal position remains strong," said Steffen Dyck, a Moody's Senior Credit Officer and co-author of the report.
While the government has announced ambitious and comprehensive reform plans, Moody's expects implementation of reforms to be challenging.
Moody's forecasted that over the medium-term the government's revenue sources will become increasingly diversified, with oil and gas revenue declining from 72 percent of revenues in 2015 to 54 percent by 2020.
"The rating also incorporates an element of geopolitical risk, driven by regional instability and the country's strategic rivalry with Iran," said Moody's.
(Anadolu Agency)
