Fitch Ratings highlights government-linked firms debts decline

Fitch Ratings Agency has highlighted a reduction in the debts of government-linked companies across Gulf countries, signaling their continued significance as key instruments for shaping economic and financial policies in the years ahead.

The agency attributes this trend to governments in the region relying on these entities to drive economic diversification and support budget priorities, reports Al-Qabas daily.

According to Fitch’s report, government-linked companies in Gulf nations exhibit varying trends, ranging from Oman’s efforts to reorganize and enhance the sustainability of its governmental institutions to Saudi Arabia’s utilization of such entities to bolster economic diversification.

The report reveals that the total debts of non-banking government-linked companies in the Gulf have decreased to 25% of GDP from 33%, with debt levels ranging from 13% in Kuwait to 44% in Abu Dhabi.

Furthermore, Fitch notes a decline in the debts of government-linked banks in the Gulf, which now stand at 16% of GDP, with varying levels from 6% in Bahrain to 44% in Qatar. The banking sector’s assets, representing 91% of GDP in Oman to 225% in Qatar, underscore the government’s commitment to safeguarding depositors.

Fitch affirms that Gulf countries have a longstanding history of supporting their affiliated institutions, indicating a high likelihood of future government assistance to these entities, underscoring their enduring importance in economic growth strategies.

In conclusion, Fitch suggests that the indebtedness of government-related institutions in Gulf nations, particularly Qatar and Oman, has the highest potential to impact sovereign ratings due to exposure versus balance sheet strength. However, recent years have seen a decline in risks, contributing to credit rating improvements in Qatar and Oman alongside other factors.

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