Saudi economic reform plan credit positive: Moody’s

The recent approval of Saudi Arabia’s National Transformation Program (NTP) is credit positive, as the plan provides necessary steps to achieve economic diversification and boost competitiveness, Moody’s said on Monday.

“Although Moody’s sees significant implementation risks, we think that even if Saudi Arabia implements part of the NTP, the plan will benefit the sovereign’s credit quality by supporting its fiscal and economic strength,” the ratings agency explained in a note.

Last week, the Saudi cabinet approved the five-year reform plan, part of Vision 2030, which aims to triple non-oil revenues to SAR 530 billion, or 22 percent of GDP by 2020. Under the program, the government will raise fees for government services, impose taxes on some goods, and cut spending on public wages.

An income tax on foreigners working in the kingdom has also been proposed; however, no final decision has been made on the matter.

Moody’s described the NTP as an “enormous undertaking” and warned of the possibility of obstacles the kingdom may face during the implementation process.

“Aside from political challenges, the logistical challenges of implementing such a broad set of reforms in an environment that has proven so resistant to change in the past are very significant,” it added.