How ironic – Moody’s issues a caution to oil producing nations: we might downgrade your credit rating

Moody’s, whilst maintaining its high ratings of the monolines, issued a stern sounding almost Puritanical caution to the nations of the Arabian Gulf (Kuwait, Qatar,  Saudi Arabia, Bahrain, Oman, and UAE ). 

Moody’s is worried that these nations are making and spending so much money (driving inflation).  Moody’s issued Speccial Announcements on the Governments of the Arabian oil producing countries — implying that if they keep on their path of making and spending lots of money, their national credit rating will be scrutinized and may be downgraded.  And this is at the very same time that the U.S. is deep into deficit spending.  Hmmm.

Excerpt: “Gulf States’ Spending Hikes Could Have Future Ratings Impact”

 “Moody’s acknowledges that, over the short to medium-term, the robust creditworthiness of GCC governments is unlikely to be undermined by strong spending growth. This is because oil prices remain at historically high levels, generally wide fiscal surpluses are being maintained despite spending increases, and GCC governments have accumulated large cushions of net assets with which to meet potential future liabilities.”

“However, there could be longer-term adverse implications: the danger is that governments will find themselves dependent on ever higher oil prices to balance their budgets, making it more difficult for them to adjust in the event of a downturn in revenues. Large increases in current expenditure are of particular concern as they are more difficult to reverse than hikes in capital spending in the event of a potential downturn in revenues.” 

Does anyone else think this is a funny way for Moody’s to be spending its time nowadays?


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