Saudi Arabia Affirmed by Moody's on Fiscal Consolidation Effort

(Bloomberg) -- Saudi Arabia’s sovereign credit rating was affirmed at A1 by Moody’s Investors Service on expectations that fiscal consolidation will continue over the medium term, stabilizing the government’s debt burden.

Moody’s expects the government’s ambitious structural reform agenda to "reduce the exposure of Saudi Arabia’s economy and public sector balance sheet to oil prices," according to the statement. The stable outlook indicates that the risks to the ratings are balanced, the agency said.

Saudi Arabia’s economy contracted 0.7 percent last year as the kingdom cut oil output and the private sector struggled with lower crude prices and rapid economic policy shifts meant to diversify and open up the oil-reliant economy.

Saudi Arabia raised $11 billion this week in the biggest dollar bond sale by an emerging market nation this year. The kingdom plans to borrow a total of $31 billion this year to bridge an expected budget deficit of $52 billion and fund its growth plans.

Crown Prince Mohammed bin Salman’s growth blueprint would wean the country off oil while selling stakes in state-owned companies, including up to 5 percent of oil giant Aramco. The government has also cut energy subsidies and introduced new fees and taxes to try to rein in its budget deficit while contending with shrinking reserves.

Moody’s last changed its rating for Saudi Arabia in 2016, when it downgraded the kingdom from Aa3 to A1 as it struggled with a slump in oil prices. Earlier this month S&P Global Ratings affirmed the kingdom’s credit rating at A-, with a stable outlook. The kingdom is rated A+ by Fitch Ratings.

To contact the reporters on this story: Vivian Nereim in Riyadh at vnereim@bloomberg.net, Chiara Vasarri in New York at cvasarri@bloomberg.net.

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Glen Carey

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