The sovereign wealth funds (SWFs) of Abu Dhabi, Kuwait and Qatar have underpinned the resilience of their sovereign ratings despite lower oil prices and the coronavirus shock, Fitch Ratings said.
The SWF assets of these countries could even increase in 2020 due to supportive market returns, despite governments using SWFs' foreign assets and other deposits to cover government funding needs in 2020.
The uplift to ratings from SWF assets has been stable or increasing despite materially larger fiscal and external deficits in 2020.
According to the global ratings agency, SWF assets in Abu Dhabi, the UAE, Kuwait and Qatar provide two to six notches of uplift to sovereign ratings by boosting sovereign net external asset positions, fiscal balances, and overall financing flexibility.
Estimated gross sovereign external assets of these countries are sufficient to cover five to eight years of total government spending and six to eight years of non-oil deficits.
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