Japan's Mitsubishi UFJ Financial Group (MUFJ) said that large levels of the fiscal deficit may put pressure on Saudi Arabia's credit rating and increase the cost of borrowing, while the dollar bonds of the Kingdom incurred losses on Monday, affected by the warnings of Finance Minister Mohamed Al-Jadaan.

MUFJ Bank expected the kingdom’s real GDP to shrink 3.2% this year, in what would be its worst performance since 1999, and expected the public debt to rise to 3.16% of GDP - the highest since 2005 - and a decrease in foreign reserves of up to 47 Billion dollar.

In its note, the bank added that the Kingdom's massive financial reserves will help it to overcome oil prices decline in the medium term.

Saudi Arabia raised the borrowing ceiling to 50% of the gross product instead of 30% last March, and sold international bonds of $ 12 billion this year.

Earlier, Moody's revised its outlook for the kingdom’s rating from “stable” to “negative”, but kept its credit rating for Saudi Arabia at “A1” (A1).

The agency said a few days ago that the collapse of oil prices due to the Corona pandemic had increased financial risks to Saudi Arabia and would erode its sovereign financial reserves.

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Losses
meanwhile The dollar bonds (a debt instrument) of the Saudi government suffered losses in early transactions today, Monday, as investors absorbed the Minister of Finance's statements at the weekend about strict and painful measures that the Kingdom might take to deal with the economic repercussions of the Corona virus pandemic.

By 07:36 UTC, Saudi Arabia’s 35-year bonds have matured 2055 by 1.4 cents, to trade at 89.8 cents in the dollar, while forty-year bonds have lost 2060 maturity to 1.6 cents, to be traded at 98.2 cents in the dollar.

The Kingdom's other bonds witnessed sharp losses, while most of the other Gulf bonds suffered lower losses, some of them even recorded slight increases.

Financial analyst Nidal Khouli told Al Jazeera Net that the higher the risk ratio regarding the ability to pay, the less a percentage of the bond price will be deducted.

He added that the horizon has become foggy for the oil-producing countries, in light of the decline in oil prices as well as the decrease in global demand as a result of the consequences of the Corona virus, indicating that this raises the level of pressure on the budget of countries and then the ability to pay, including Saudi Arabia, which depends on oil revenues By more than 90%.

Nidal Khouly warned that if the Corona crisis lasts for months, in addition to the absence of an international consensus on reducing oil production, we will not only be in the financial deficit of countries dependent on oil, but economic crises, and perhaps a state of bankruptcy for some, as he put it.