LONDON: Saudi Arabia’s prospects depend more on government reforms becoming “irreversible” than the price of oil, said Moritz Kraemer, global chief rating officer for S&P in an interview with Arab News.
He said: “If oil went to $100 per barrel again there would be a risk of undermining the reform momentum — and helping those campaigning to maintain the previous status quo.
“We don’t think the oil price will determine the fate of the country. The policies that are chosen will determine future economic stability,” said Kraemer.
He added that S&P’s forecast for the average price of crude in 2018 was $60 a barrel, falling to $50 a barrel in 2019, underlining how important it was that KSA reduced its dependence on crude to secure prosperity.
Kraemer said today’s Saudi Arabia contrasts with to an earlier era when there “had been so many internal, opaque checks and balances that you really never had any policy momentum developing in any direction. There was a sort of stagnation in policy-making.”
Looking at recent reform initiatives in KSA, Kraemer noted that the objectives were very demanding, but would most likely be met in the timeframe laid out. However, what was really important was “the direction of travel,” namely bringing in more private capital, to develop the country, “whether that happens slower or faster is less important than the irreversibility of the process,” he said.
The Kingdom should maintain growth of spending, and one way of trying to achieve this was by getting the private sector more involved in service delivery, health and education and also infrastructure.
Asked whether investor appetite for Saudi debt was good, Kraemer said yes, and this was seen when the government issued bonds for the first time in 2016 — with the $17.5 billion offering oversubscribed four times.
But the domestic capital market still needs developing. The take-up of Saudi government bonds was largely, but not exclusively, by foreign investors. The local market was relatively undeveloped compared to countries such as Turkey and the UAE, he said.
To remedy matters, Kraemer said regulation needed to be “more helpful,” although the authorities were working on improvements.
The assignment of credit ratings to Saudi companies would help domestic corporates to raise debt both at home and abroad — but for this to happen KSA groups would have to disclose more details about their affairs, he said.
In the context of Vision 2030, Kraemer flagged up significant financing needed for infrastructure projects. “We foresee a lot of activity linked to PPPs (public private partnerships). Funding would be partly covered by the banks, but some would have to come from debt markets,” said Kraemer.
With interest rates rising, he was relaxed about the effect on KSA. During S&P studies, the Kingdom regularly showed up as least vulnerable to the threat of outflows of foreign capital in a rising interest rate environment.
Turkey was among the countries most at risk, he said, but Qatar also had issues.
He said: “If you look at what Qatar needs to borrow compared to how much foreign exchange reserves they have, and how much current account receipts they have, it looks quite weak. They need to pay and borrow more than KSA — not in absolute terms, but relative to their export receipts.”
On the other hand, Qatar had substantive external investments, and “a hugely liquid portfolio of foreign bonds and shares that they could run down if there was a squeeze, so they were well buffered.”
Saudi debt would not reach anywhere near something that “could be described as alarming,” according to S&P forecasts, he said.
According to the World Bank’s 2018 outlook on the Middle East and North Africa, growth in the region is expected to jump to 3 percent in 2018 from 1.8 percent in 2017.
Growth in Saudi Arabia was forecast to accelerate to 1.2 percent in 2018 from 0.3 percent in 2017, while in Egypt, growth is anticipated to pick up to 4.5 percent from 4.2 percent last year.
In a report at the end of 2017, S&P said its stable outlook on KSA was based on the expectation that the Saudi authorities would continue to take steps to consolidate public finances and maintain government liquid assets close to 100 percent of GDP over the next two years.
It added: “We think the risks emanating from recent shifts in Saudi Arabia’s political power structures and societal norms, alongside various regional stresses, are balanced by the possibility that these structural reforms could empower Saudi citizens and make Saudi Arabia more attractive to investors over the medium term.”
But S&P said its ratings could come under pressure if it observed a significant increase in domestic or regional political instability as a result of the increasing centralization of power.
Future of Saudi economy about policy, not prices says S&P chief
Future of Saudi economy about policy, not prices says S&P chief
Saudi National Development Fund sees 45 agreements worth $1.6bn at Momentum 2025
RIYADH: Saudi Arabia’s National Development Fund and its affiliates signed 45 agreements with a total value of SR6 billion ($1.59 billion), with several local and international partners at the conclusion of the Momentum 2025 development finance conference.
The event, held from Dec. 9 to 11 at the King Abdulaziz International Conference Center in Riyadh, was organized by the NDF under the patronage of Prince Mohammed bin Salman bin Abdulaziz Al Saud, crown prince, prime minister, and chairman of the NDF board of directors.
The new agreements seek to accelerate the pace of investment, empower the private sector, and unlock new opportunities in priority sectors including small and medium sized enterprises, tourism, and sustainable development.
On the institutional level, the fund signed two strategic agreements with two leading global partners in technology and professional services, aiming to enable artificial intelligence, data, and digital solutions within the development finance ecosystem.
The two memorandum of understandings aim to enhance the institutional capabilities of the fund, encourage innovation in products and services, and improve the efficiency and overall impact of development financing in the Kingdom.
The NDF signed a memorandum of understanding through the National Infrastructure Fund aimed at unifying the efforts of the development system to support small enterprises by cooperating on designing a developmental financing model for SMEs.
The Saudi SME Bank signed 19 cooperation agreements and MoUs with a value exceeding SR3 billion, to support the developmental finance system and enhance integration between public and private sector entities.
The Tourism Development Fund concluded 6 agreements with entities from both the government and private sectors, strengthening its partnerships with an impact exceeding SR4 billion. These aim to enhance financing solutions through the “Tourism Enablement Programs” offered by the fund to micro, small, and medium enterprises.
The Cultural Development Fund signed five credit facility agreements within the framework of the “Cultural Financing” program, with a total value exceeding SR63 million, to finance numerous cultural projects.
As part of its efforts to support human capital development, the Human Resources Development Fund concluded 3 agreements aimed at supporting and enabling 2,191 male and female job seekers in multiple sectors, with a value exceeding SR324 million.
The Saudi Industrial Development Fund signed a cooperation agreement with the Saudi Railways Co. to identify cooperation opportunities in enabling the industrial sector, including the railway sector, and supporting investors in localizing goods and services to increase local content.
The Saudi Fund for Development signed five developmental memoranda of understanding with Imam Mohammad Ibn Saud Islamic University, the Islamic Military Counter Terrorism Coalition, and the Middle East Green Initiative, as well as the Saudi Agricultural and Livestock Investment Co., and the Arab Urban Development Institute.
The Investment Events Fund signed a partnership agreement with entertainment firm Legends Global to enhance the events sector by leveraging international expertise in organizing major global events.
The agreements and MoUs signed during the Momentum 2025 conference represent a significant step in the Kingdom’s efforts to build a diverse, inclusive, and sustainable economy.
These partnerships contribute to bridging financing gaps, mitigating risks for strategic projects, and achieving long-term value for Saudi citizens, companies, and communities. Furthermore, they advance global sustainable development goals by aligning public and private capital with national priorities in infrastructure, SMEs, and green growth.
Dialogue sessions embody development transformation message
The conference agenda included over 35 sessions addressing sustainable investment, climate adaptation, and the role of development finance institutions in expanding economic opportunities. It also featured an exhibition with participation from more than 20 public and private sector entities.
Over 100 speakers from more than 100 countries participated to discuss ways to develop financing for development efforts, tackle emerging global challenges, and accelerate national and international priorities.
The conference concluded with a session titled “The Role of Development Finance Institutions: Enabling Development by Enhancing Financial Capabilities,” which brought together the Governor of the NDF, Stephen Groff, and the CEOs of various development funds and banks.
The session discussions focused on enhancing joint coordination, improving investment readiness, and expanding developmental impact across multiple sectors including tourism, infrastructure, and SMEs.
During the roundtable discussion, participants reviewed the pivotal role led by the Fund and its development ecosystem across various sectors and their role in supporting the economic transformation of the Kingdom.
Groff explained that the strength of this ecosystem lies in the diversity of the funds and the integration of their mandates, adding that achieving the targets of Saudi Vision 2030 requires flexibility in resource allocation and the ability to adapt to national development priorities.
In support of expanding the presence of international companies in the Kingdom and enhancing the competitiveness of the financial sector, the Minister of Investment, Khalid Al-Falih, presented the regional headquarters license to HSBC Bank on the sidelines of the conference, a step that reflects growing confidence in and the attractiveness of the Saudi market to global financial institutions.
To enrich the development sector, the Digital Cooperation Organization launched, on the sidelines of the conference, the Digital Economy Trends 2026 report. The report predicted that the global digital economy will grow by 9.5 percent next year, three times faster than global economic growth.
