(Adds details on rating cut, background on oil prices)

May 1 (Reuters) – Moody’s Investors Service cut Saudi Arabia’s outlook to “negative” from “stable” on Friday, citing higher fiscal risks for the Gulf nation due to the crash in oil prices, and uncertainty about the Saudi government’s ability to offset the oil revenue losses and stabilize its debt in the medium term. (bit.ly/3aRYDMd)

However, the ratings agency affirmed sovereign credit rating at “A1”, citing Saudi Arabia government’s “still relatively robust, albeit deteriorating” balance sheet, moderate debt level and substantial fiscal and external liquidity buffers.

Global fuel demand has tumbled by a third due to coronavirus-related lockdowns and business shutdowns.

“The plans to diversify Saudi Arabia’s economy away from oil could lift the country’s medium- to long-term growth potential,” Moody’s said in a statement

However, “The risks associated with the implementation of the diversification agenda are high and the benefits will likely take many years to materialize,” Moody’s added.

The Saudi Arabian Monetary Authority said late on Tuesday that Saudi Arabia’s central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while the kingdom slipped into a $9 billion budget deficit in the first quarter as oil revenues collapsed.

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