SAUDI ARABIA/BLOOMBERG

ECONOMY

Saudi Aramco IPO could support government finances, says S&P

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Saudi Arabia (A-/Stable/A-2) put a preliminary valuation on its state-owned oil giant Saudi Aramco of between $1.6 trillion and $1.71 trillion, short of the $2 trillion target set by Crown Prince Mohammed bin Salman in 2016.
MONDAY 18, NOVEMBER 2019

S&P Global Ratings said that Saudi Aramco’s forthcoming listing on Tadawul could help strengthen the government’s net asset position, with the proceeds potentially raising the Kingdom’s longer-term economic growth.

S&P said that the bulk of the funds raised will go to the government or the Public Investment Fund, potentially adding to the sovereign's already strong fiscal net asset position of 72.7 per cent of GDP, adding that if productively deployed, the assets could also help maintain growth potential through our three-year ratings horizon.

Public investment in Saudi Arabia is forecasted to remain quite high, even though the sovereign has implemented some fiscal belt-tightening. The Kingdom’s expenditure is intended to support the non-oil economy and private sector demand and S&P’s current forecast for average GDP growth is 1.6 per cent annually between 2019-2022.

S&P said that its ratings on Saudi Arabia continue to be supported by the Kingdom’s strong external and fiscal asset positions, however, the ratings are constrained by high geopolitical risks, sizable fiscal deficit and the limited transparency of its institutional framework as well as the reporting of government assets.

TAGS: SAUDI ARAMCO TADAWUL PUBLIC INVESTMENT FUND S&P GLOBAL RATINGS PUBLIC SHARE SALE IPO
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