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Fitch raises Oman’s credit rating on lower external debt

A dhow sailing in Musandam, Oman. S&P says its ratings could be raised over the next 18 months if Oman’s fiscal position strengthens Unsplash.com
A dhow sailing in Musandam, Oman. S&P says its ratings could be raised over the next 18 months if Oman’s fiscal position strengthens

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

The upgrade reflects the use of high oil revenues to pay down debt and spread its maturity, spending restraint reducing external risks, and an increase in oil price forecast, the ratings agency said in a statement.

“We project general government debt to fall to 36 percent of GDP in 2023 and stabilise at around 35 percent in 2024 and 2025, below the ‘BB’ peer median of 54 percent,” Fitch said.

The revision compares with its forecast of 45 percent of GDP in 2023 in August 2022.

The rating agency expects the government to continue recent fiscal consolidation measures. Reducing the fiscal breakeven price to below $70 per barrel over the forecast horizon, from $80-90 over 2017-19, also significantly reduces vulnerability to oil price swings, although risks remain.

“We project Oman Investment Authority’s net foreign assets to return to a positive position in 2023, after falling to -9 percent of GDP in 2020, from 53 percent in 2014.”

Forex reserves will rise only modestly this year as debt repayments continue, to cover 3.3 months of current account payments, below the ‘BB’ median of 4.3 months.

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 recorded a fall of 9.5 percent in the second quarter of 2023, largely 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.

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