Fitch ratings agency has upgraded Saudi Arabia’s credit rating from ‘A’ to ‘A+’. The boost, made due to the Gulf state’s strong fiscal and external balance sheets along with a favourable debt-to-GDP ratio and robust sovereign net foreign assets, follows the decision by Saudi Arabia and other OPEC+ members to cut crude oil production, announced last week. Although tax diversification to non-oil sectors is a priority for the Saudi Arabian administration, Fitch notes that crude oil revenue will still account for almost 60% of the country’s total budget revenue in 2023-24. Further progress in governance, fiscal and economic reforms will also be required to maintain the upgrade. Fitch said: “Oil dependence, weak World Bank governance indicators and vulnerability to geopolitical shocks remain relative weaknesses, although there are some indications of improvement in these factors.” Despite the uplift, investors should note that Middle East tensions and the continued reliance on oil-based revenue could still lead to a potential downgrade.
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