Economy

S&P upgrades Oman’s credit rating on lower debt risk

By Pramod Kumar

October 2, 2023, 5:15 AM

Major government reforms, such as the reorganisation of government-related entities, are starting to yield results, said S&P

S&P Global Ratings has upgraded Oman’s credit ratings on the back of a continued positive outlook for the oil sector and fiscal and economic reforms momentum over 2023-2026.

The ratings agency raised its long-term foreign and local currency sovereign credit ratings on Oman to “BB+” from “BB”. It also affirmed the sultanate’s short-term ratings at ‘B’, with a stable outlook.

“The upgrade reflects the improved resilience of the Omani economy to external shocks on the back of continued supportive oil sector prospects along with sovereign balance sheet deleveraging and broader structural reforms,” S&P said in a report.

High oil prices will continue to support Oman’s fiscal surpluses and the government’s efforts to reduce debt, it added.

Major government reforms, such as the reorganisation of government-related entities, are starting to yield results, improving operational efficiency and strengthening the financial profiles of these individual companies.

S&P expects the GDP growth to average two percent over 2023-2026 after a year of slowdown due to voluntary crude output cuts.

Brent oil prices will average $83 per barrel in 2023 and $85 in 2024 and beyond.

“This will support the government’s efforts to use ongoing fiscal surpluses for debt repayment. We estimate that government debt will decrease to 38 percent of GDP in 2023, down from close to 40 percent in 2022,” the ratings agency said.

Increased revenue on higher oil prices helped Oman post a budget surplus of OMR1.144 billion ($2.97 billion) last year. The government repaid OMR1.1 billion in loans in the first quarter of this year.

High oil prices have helped Oman post a budget surplus of OMR1.14 billion ($2.97 billion) in 2022, with OMR1.1 billion in loans repaid in the first quarter of this year.

Oman’s GDP fell 9.5 percent in the second quarter of 2023, primarily due to a slowdown in oil-related activities.

The sultanate’s GDP was OMR10.1 billion ($26.24 billion) in the second quarter, compared with OMR11.1 billion for the same period last year, according to the National Center for Statistics and Information.

Earlier this week, Fitch Ratings upgraded Oman’s credit rating to BB+ from BB with a stable outlook as lower external debt has reduced liquidity risks.