Mena debt servicing may be at risk: S&P

Several sovereigns in the Middle East and North Africa (Mena) could see negative ratings action in the near future and there is a risk that governments' willingness to service debt could be impacted, Standard & Poor's said on Monday.

"There are a number of sovereigns where we could see negative ratings action but all cases will of course depend on events," Kai Stuckenbrock, director in S&P's EMEA sovereign ratings group, told a teleconference.
 
"If you look at ratings on sovereigns where we have taken rating action recently all have negative credit watch or outlook. The former signifies relative short-term risk that ratings could move in a downward direction."

He added: "The risk (is) that political upheaval and weaking of institutions could weaken sovereign willingness to service debt."

S&P said however it was not overly worried about Saudi Arabia though risks of upheaval are present in the world's largest oil exporter.

S&P rates Saudi Arabia at AA- with stable outlook.

"We are not very worried about... potential negative implications for credit ratings," said Christian Esters, also a director in the EMEA sovereign ratings group.

S&P also warned on Monday that it could downgrade Oman's credit ratings after it put them on CreditWatch negative because of unrest in the country.

S&P said the action "reflects our view that the current social unrest in the country and the possible repercussions of regional conflicts could increase political risks in Oman, which might eventually also negatively affect economic growth and public finances.

"As recent events in the region have shown, political risk from popular discontent can mount very quickly and can undermine political stability," it said in a statement.

"If tensions were to escalate in Oman, it could lead to Oman's ratings being lowered within the next three months.

"Similarly, if the government's fiscal response to political pressures were to undermine Oman's comparatively strong public finances, or if exports of Oman's oil or gas products were to be affected, Oman's external position could weaken and the ratings could be lowered.

"On the other hand, if the government is able to address public grievances without putting too much burden on public finances and external investor confidence, then we believe the ratings could stabilise at the current levels."

Popular unrest in Tunisia and Egypt forced their longstanding, autocratic leaders to stand down earlier this year while Libya appears to be sinking into civil war following protests there against Moamer Khadafi's 41-year rule.

There have been protests elsewhere too, demanding change and democratic reforms, and on Monday Omani protesters demanding a clampdown on corruption in the Gulf state maintained vigils despite the sacking of two ministers and pledges to create jobs.

Protesters in the normally placid sultanate insist that their demands are confined to reform and a crackdown on corruption, without challenging the legitimacy of Sultan Qaboos, who has ruled Oman for four decades.

S&P said its action covered Oman's 'A/A-1' long-term and short-term local and foreign currency ratings which were put on CreditWatch with negative implications.

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