Moody’s cuts credit ratings of Saudi Arabia, Oman and Bahrain
The agency cut Saudi Arabia’s long-term issuer ratings by one level to A1 from AA3 while maintaining the country’s outlook at stable. Oman’s credit rating was also downgraded one level to BAA1, while Bahrain’s rating was reduced to BA2.
Retreating energy prices have affected oil exporting Gulf economies, which utilize the money from oil sales in infrastructure projects to respond the needs of a fast-growing population. Some of these countries cut spending, raised taxes, reduced subsidies or took loans in order to cope with budgetary shortfalls occasioned by lower oil prices.
As for Saudi Arabia, the country’s budget deficit reached nearly $100 billion in 2015 due to a drop in oil revenues while its foreign reserves also dropped by over $155 billion to below $600 billion in March, government data revealed. Moody’s expects foreign reserves to keep going down to $460 billion through 2019. On the other hand, Saudi Arabia took a loan worth $10 billion from international banks last month and is likely to borrow more this year. The agency said that Saudi Arabia’s efforts to diversify its economy would help improve its creditworthiness if they succeed.
Standard & Poor’s had previously downgraded Saudi Arabia’s rating to A- in February, citing lower oil prices.
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