Saudi Arabia says S&P credit rating cut 'unjustified'
Saudi Arabia has censured Standard and Poor's (S&P) organization over cutting its credit rating, denouncing the move as “unjustified.”
“The evaluation... came as a hasty reaction, unjustified and not backed by reality,” said the Saudi Finance Ministry in a Saturday statement, adding that the rating agency relied on “temporary and unsustainable factors.”
In a press release on Friday, S&P downgraded the kingdom’s long-term foreign and local currency sovereign credit to A plus/A-1 from AA minus/A-1 plus.
The US financial services company cited a "pronounced negative swing" in the country’s fiscal balance over low oil prices.
S&P also kept its negative outlook on the top crude exporter of the world and warned Riyadh of a further drop in its rating within the next two years if the monarchy fails to attain a “sizable and sustained reduction in the general government deficit.”
The Saudi ministry, meanwhile, pointed to the rating agency’s previous downgrading of its ratings within this year from AA- with a positive outlook to A+ with a negative outlook because of the drop in oil price. It said the Saudi economy is fundamentally powerful as the government's net assets goes beyond 100 percent of gross domestic product besides huge foreign exchange reserves.
According to data provided by the International Monetary Fund, Saudi Arabia had a USD-17-billion budget deficit in 2014 and is expected to record a deficit of about USD 130 billion in 2015.
S&P said due to the fall in the price of oil, which is the kingdom’s main source of revenue, Riyadh saw its deficit rose to 16 percent of the GDP this year compared with 1.5 percent last year.
Since June last year, the price of a barrel of oil has fallen from USD 90 to less than USD 50.
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