Saudi Arabia’s long-term foreign-currency issuer default rating (IDR) of “A+” with a “stable” outlook has been confirmed by Fitch Ratings.
The ratings are a reflection of the robust fiscal and external balance sheets of the nation, with sovereign net foreign assets (SNFA) and government debt/GDP being significantly higher than both the ‘A’ and ‘AA’ medians.
The Kingdom also possesses substantial fiscal buffers in the form of deposits and other assets belonging to the public sector. However, relative weaknesses still exist, including reliance on oil, low World Bank governance metrics, and susceptibility to geopolitical shocks.
With 160.5 months of current external payments, Saudi Arabia has one of the highest reserve coverage ratios among sovereigns rated by Fitch. Similar to 2023 and just above the 1% of GDP budget plan, Fitch projects a budget deficit of 2.3% of GDP in 2024.
“We expect spending 3.5% above budget, at SAR 1.3 trillion on higher capex and procurement. We also assume revenue to be higher than budgeted and higher than in 2023, despite our assumption that average oil production and prices will be lower,” the rating agency said, Zawya reported.
Saudi Aramco will provide performance-related dividends to support revenue. However, considering that spending is in line with budget plans, oil prices are down, and oil production is up at 10 million barrels per day, the rating agency projects a larger budget deficit of 2.8% of GDP in 2025.
However, oil dependence is still a rating weakness. In 2024–2025, oil revenue will make up about 60% of total budget revenue (compared to 90% ten years ago), and oil GDP will make up 30% of total nominal GDP.
“Saudi Arabia’s fiscal break-even oil price for the budget has risen in recent years and we forecast it will remain above $90 per barrel in 2024 before falling to $85 per barrel in 2025,” the rating agency said.