Oil-rich Gulf countries including Saudi Arabia and Qatar have hit out at credit rating agencies for not awarding them prized A rankings to reflect their financial health.
As the credit ratings of developed economies such as the US and the UK are downgraded, the Gulf states believe they are not accorded the status they deserve by Moody’s, Standard & Poor’s and Fitch.
“We see advanced economies with double A and some of them are reduced even further, while emerging markets like my own country…we’re really deserving of a higher credit rating,” Ibrahim al-Assaf, Saudi Arabia’s finance minister, said on the sidelines of an Arab ministers’ meeting late on Tuesday.
Gas-rich Qatar, among the wealthiest countries in the world, is also pushing for an upgrade of its double A rating from S&P. Like Saudi Arabia, it argues that it is deserving of the prized “AAA” rating.
“We have history of 37 years,” said Yousef Kamal, Qatar’s finance minister. “We never defaulted, in difficult times we paid.”
Rating agencies point out that the grades they award are based not simply on the financial position of countries, but a range of factors including their political stability. It was only in 1995 that Qatar’s former Emir was overthrown by his son in a bloodless coup. Saudi Arabia’s current monarchical succession is unclear, and Bahrain is still facing a restive local population.
“It’s not only about money,” said Dima Jardaneh, a director at Standard & Poor’s. “The political issues and the monetary issues are constraints on the ratings.”
While many Gulf countries receive high marks for their financial solidity, they are also hurt by their opaque centralised decision-making, sole dependence on hydrocarbons, and their decisions to sacrifice some control over monetary policy by tying their currencies to the dollar.
Tristan Cooper, formerly Moody’s Middle East sovereign analyst and now an analyst at fund manager Fidelity, said most countries are sensitive about their ratings.
“I have been yelled at by many people during my time at Moody’s – downgrading sovereigns is not fun, especially in the Middle East – although thankfully I didn’t have to very often,” he said.
Abu Dhabi, the capital of the United Arab Emirates, has not pushed publicly for an upgrade of its double A credit rating from Fitch, and Kuwait’s finance minister Mustafa al-Shamali said the changing global climate “doesn’t change anything” for the country’s double A rating.
Bahrain has faced multiple downgrades a result of violent clashes that have erupted since 2011 while Oman is rated A by Standard & Poor’s with a stable outlook.
But there is some indications that some Gulf states’ complaints are being heard. Last month, Fitch affirmed Saudi Arabia’s double A-minus rating but revised the country’s outlook to positive from stable, its first such move in the Gulf since the financial crisis.
The country could see a one notch upgrade if there is more progress on unemployment, diversifying the economy and increasing its capital buffers, Fitch said in a statement in March.
Mr Assaf appears confident: “The credit rating agencies raise minor issues and issues that are important but we have been dealing with them. I hope that next review will result in a higher rating for Saudi.”
Get alerts on Ratings agencies when a new story is published