Moody’s Investors Service has maintained its A1 credit rating for Saudi Arabia, affirming the government’s fiscal consolidation plans introduced to lessen the country’s reliance on oil.
Cuts to government expenditure and new non-oil revenue generating initiatives — including lower subsidies on water and electricity — saw the Kingdom’s debt to GDP ratio come in at 17.3 percent for 2017, well below Moody’s initial forecast of 28 percent.
The Saudi government has postponed plans to eradicate the deficit to 2023 from an original target date of 2020, alongside an expansionary budget for 2018 to kickstart the economy.
“It is Moody’s view that the modification of the (Fiscal Balance Program) announced in January 2018 to delay the achievement of a balanced budget to 2023 instead of 2020 makes the fiscal reform momentum more sustainable, the fiscal targets more realistic, and the overall fiscal consolidation and diversification program more credible,” the agency said in a statement.
“A more relaxed consolidation will allow for smoother absorption of energy and water price increases by the consumers and businesses and create room to support non-oil economic growth through targeted support programs.”
Moody’s maintained its stable outlook for Saudi sovereign debt, a week after a similar move by fellow rating agency S&P.
“If progress is maintained in line with Moody’s expectations, the reforms will help to sustain the recent increase in the relative size of the non-oil sector of the economy even as the oil sector recovers, and gradually reduce the vulnerability of Saudi Arabia’s economy and public sector balance sheet to declines in oil prices,” it said.
