Standard & Poor's raises Oman's credit rating
The credit rating Agency Standard & Poor's has upgraded Oman's rating from BB+ to BBB- with a stable outlook, reflecting the improved financial performance of the country.
The BBB- rating indicates a safe investment environment as the first level of investment grade according to Standard & Poor's credit rating scale.
The report says that Oman's credit rating could improve further in the next two years.
Oman has returned to investment grade after a decline that lasted about seven years (since 2017) due to the global oil price downturn and the COVID-19 pandemic.
Commenting on the report upgrading Oman's credit rating, Minister of Finance, Sultan bin Salem Al Habsi, said this confirms that the Government is on track to achieve national objectives of restoring fiscal balance and attaining financial sustainability.
The Agency says in its report that the improvement in Oman's credit rating is due to ongoing financial reforms.
These reforms include initiatives in the financial and economic sectors, and Government restructuring measures. These have contributed to restoring fiscal balance between revenues and public spending in the medium-term fiscal plan, leading to the beginning of budget surpluses.
The Government’s commitment to reducing public debt and improving corporate governance in state-owned enterprises has helped lower their indebtedness.
With the rise in average global oil prices and the positive outcomes of financial measures, the Government has strengthened the state's financial position, providing flexibility to manage any sudden external shocks.
The Agency expects the state budget to achieve moderate surpluses of 1.9% from 2024 to 2027, assuming that the average price of Brent crude oil will be around USD 80 per barrel during the period from 2025 to 2027.
This would allow the Government to continue reducing the level of public debt and to continue building financial reserves.
The Agency also expects real GDP (at constant prices) to grow by about 2% annually on average from 2024 to 2027, driven by an increase in average oil production until 2027, which will continue to stimulate non-oil sector growth by about 2% annually.
The Agency projects that the current account balance will register an average surplus of 1.2% of GDP from 2024 to 2027.
The report notes that Oman is committed to reducing public debt, which the Agency expects to reach 29% of GDP by 2027.
The Agency also indicates that inflation is expected to remain moderate, averaging about 1.4% annually from 2024 to 2027, following a rate below 1% in 2023.
The credit environment is expected to remain conducive, supporting lending growth by 5% to 6% annually. Credit growth to the private sector expanded by nearly 5% in 2023.
The report explains that since 2020 Government efforts to manage state-owned enterprises have significantly strengthened governance frameworks, enhanced operational efficiency and improved financial conditions by increasing profitability and reducing debt levels.
The establishment of Energy Development Oman (EDO) and the Integrated Gas Company (IGC) has also contributed to improving the structure of Government financial accounts by reflecting net Government revenue after deducting expenses related to the management of the oil and gas sectors.
The report states that, if the Government continues managing public finances as planned, then Oman's credit rating could further improve in the next two years
These measures are expected to sustain GDP growth, supported by the momentum in non-oil sector activities, as well as ongoing measures to establish and grow businesses that support economic diversification, alongside initiatives to develop the capital market sector.
Minister of Finance, Sultan bin Salem Al Habsi, said that the upgrade reinforces confidence in the strength of the economy and its ability to grow and expand.
He added that financial measures adopted in recent years, including the Public Debt Law, have boosted confidence in the methodology of the Ministry of Finance and corporate governance standards of state-owned enterprises. This in turn has helped to improve the investment environment.
In a statement to Oman News Agency, the Minister said that the Government is committed to continuing to enhance Oman’s public finances, and to use the resulting budget surpluses to increase economic and social benefits.
He noted that the achievements were made possible through the collaboration of all Government units, private sector partners and civil society institutions.
This is an revised English version of an Arabic report. To view the original Arabic text, click here.