Saudi disputes S&P credit ratings downgrade
Despite weak oil prices, Saudi Arabia insists that existing buffers remain large. (Icn.com)
Standarded and Poor (S&P) downgraded the credit ratings of Saudi Arabia to A+ with a negative outlook which led the Saudi Ministry of Finance to say that the agency acted on an unsolicited basis.
In a statement, the Ministry of Finance strongly disagreed with S&P's approach in this particular instance.
"We consider S&P's credit assessment reactionary, driven by fluid market factors rather than changes in the fundamentals of the sovereign," said the ministry.
In less than a year, the agency has gone from a positive outlook on the AA- rating to a negative outlook on the A+ rating, on the back of changes in the global oil price dynamics.
"We believe that S&P's decision was not only rushed, but analytically inconsistent with the idea of ratings being a medium-term tool meant to look through the cycle while assessing creditworthiness. This opinion is further reinforced by the vast difference in approach and credit view demonstrated by the other agencies."
In the meantime, the Saudi's fundamentals remain strong with the sovereign's net asset position well in excess of 100 percent of GDP and backed by substantial foreign exchange reserves.
The Kingdom's economy also continued to grow in real terms at a rate above peers despite the environment of weak commodity prices, while a thorough fiscal consolidation plan has been announced to ensure that existing buffers remain sufficiently large.
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