High oil cuts GCC borrowing needs; credit issues remain: Moodys | ZAWYA MENA Edition
During the past week, oil prices have risen to nearly $70 per barrel, up from $52 at the end of last year. If sustained during the rest of the year, higher oil prices will reduce the immediate government borrowing and external financing needs of GCC sovereigns, most significantly for Kuwait, Oman and Qatar, according to Moodys' Investors Service.
They will also increase the resources available to advance economic-diversification projects, stated the top ratings agency.
However, Moodys cautioned that the duration and durability of the current rally remains uncertain and there is a risk that the prospect of higher than budgeted oil prices will prompt governments to relax their fiscal consolidation efforts planned for the year and boost spending in areas that may be difficult to reverse when oil prices are lower like social spending and wages.
Despite the weak global oil demand, crude prices have risen in anticipation of a strong economic recovery this year on the back of the global vaccination drive and large government stimulus packages, especially in the US.
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