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Saudi Arabia’s low debt grants a significant financial flexibility: Moody’s

Total bonds that are expected to be issued will represent 4.7 per cent of the expected GDP

The low level of debt to the kingdom gives it a considerable financial flexibility to help it, even if oil prices remain at current low levels for several years, Moody’s credit rating Agency stresses.

According to Moody’s, the kingdom recorded a high budget during the past few years, where it has spent billions on massive infrastructure, social services and education projects, Aliqtisadi reported.

Moody’s predicts that the kingdom will issue bonds on a monthly rate and the total bonds issued during the year will reach SAR115 billion to ease the expected deficit amid increased spending and lower oil prices.

Moody’s explains that the total bonds that are expected to be issued will represent 4.7 per cent of the expected GDP to Saudi Arabia this year and the government’s total debt up to 6.4 per cent of GDP. Those bonds cover roughly 32 per cent of the expected fiscal deficit, which will reach 15 per cent of GDP.

Moody’s adds that the Kingdom withdrew from the reserves to cover about 65 per cent of the deficit, and it needs to withdraw more than SAR12.7bn to finance the expected deficit.

The chief economist at Abu Dhabi Commercial Bank, Monica Malik, said: “There is no crisis in the short term and Saudi Arabia has a great ability to cover the budget deficit”.

(SAR1= AED 0.98, at the time of publishing)