KSA must control spending

Moody's Investors Service, the international rating agency, affirmed the stable outlook of Saudi Arabia but highlighted the need for the country to press ahead with economic reforms.

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By  Massoud Derhally Published  August 21, 2003

In its annual report on Saudi Arabia, Moody’s Investors Service said its Baa2 rating of the Kingdom’s foreign currency ceilings and stable outlook is based on the country’s position as the world’s largest oil exporter and holder of the world’s largest proven oil reserves.

The rating agency upgraded Saudi Arabia’s ratings in June as geopolitical risk stemming from the Iraq war diminished.

“Despite the recent withdrawals of U.S. forces from Saudi soil that, on the surface, might signal a downgrading in its explicit security arrangement with the United States, Saudi Arabia continues to enjoy external protection that would be available in an extreme-case scenario,” says Adel Satel, Moody’s VP and senior credit officer and author of the report.

Moody’s explained that limited real GDP growth of 0.74% in 2002 was due mainly to a decline in the oil sector following production cutbacks.

However, the 4.2% growth in the real private sector reflects the rising economic contribution of the private sector. Fiscal performance continues to disappoint with a deficit of nearly 3% of GDP in 2002, driven mostly by the inability to rein in expenditures, said the agency.

Saudi Arabia has a a GDP of $170 billion and approximatley $175 billion in internal debt.

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