Oman regains investment grade rating 'BBB-'
Published: 05:09 AM,Sep 28,2024 | EDITED : 09:09 AM,Sep 28,2024
New York - Standard & Poor's has raised the Sultanate of Oman's credit rating to 'BBB-' from 'BB+' with a stable outlook, in its second report, due to the country's improved financial performance.
The 'BBB-' rating at Standard & Poor's is the first level of investment-grade credit rating and represents a safe investment environment.
After seven years
The Sultanate of Oman has returned to this rating category after a gap of nearly 7 years (since 2017) as it was affected by the declining global oil prices and the COVID-19 pandemic.
It took the Sultanate of Oman two and a half years of commitment to implement the procedures to regain this rating.
Measures to improve public finances
The agency said in its report issued on Friday that the improvement in the credit rating is due to the continuation of measures to improve public finances through development initiatives and measures in the financial and economic aspects, and government restructuring measures that contributed to restoring the financial balance between revenues and public spending as planned in the medium-term financial plan and the beginning of achieving financial surpluses, in addition to the government's commitment to reducing the state's public debt, governance of government companies and reducing their indebtedness.
As a result of the rise in average oil prices and achieving positive results from the financial measures taken, the government was able to strengthen the state's financial position and provide flexibility to deal with any sudden external shocks.
Budget surpluses
The agency expects the state's general budget to achieve moderate financial surpluses of 1.9 percent during the period 2024-2027, assuming that the average price of Brent crude will reach about $80 per barrel during the period 2025-2027, which will allow the government to continue reducing the level of public debt and build financial reserves.
The agency also expected that real GDP (at constant prices) would grow by about 2 percent annually on average during 2024-2027, and the increase in average oil production until 2027 would continue to stimulate the growth of the non-oil sector by about 2 percent annually.
The agency also expected the current account to record financial surpluses on average at 1.2% of GDP from 2024-2027.
The agency explained that the Sultanate of Oman is committed to reducing the total public debt, as the agency expects it to reach 29 percent of GDP in 2027.
At the same time, the agency indicates that the average size of liquid monetary assets will remain at 36 percent of GDP until 2027.
The agency also indicated in its report that inflation is expected to remain moderate, averaging about 1.4 percent annually during the period 2024-2027, after reaching a low rate of 0.9 percent in 2023.
On the other hand, credit growth to the private sector expanded by a high rate of 4.9 percent in 2023, and the credit environment is expected to remain favorable, driving lending growth by about 5 to 6 percent annually.
Public sector companies
The report explained that government efforts in managing government public sector since 2020 have contributed to strengthening governance rules, enhancing operational efficiency, and improving financial conditions with an increase in corporate profitability and a decrease in debt rates.
The establishment of the Oman Energy Development Company (EDO) and the Integrated Gas Company (IGC) also contributed to improving the structure of government financial accounts by showing net government revenues after deducting expenses related to managing the oil and gas sectors.
Further improvement
The report stated that the credit rating of the Sultanate of Oman may witness further improvement over the next two years if the government continues to commit to managing the country’s public finances as planned to increase non-oil revenues and raise the efficiency of public spending, which it is hoped will continue to drive GDP growth supported by continued momentum in the growth of non-oil sector activities, in addition to continuing measures aimed at enhancing the establishment and growth of companies and projects that support economic diversification activities and operations, in addition to initiatives to develop the capital market sector.
Public Debt Law
Sultan bin Salem al Habsi, Minister of Finance, pointed out that the Standard & Poor's report raising the credit rating of the Sultanate of Oman confirms that the government is on its way to achieving the national goals of restoring financial balance and achieving financial sustainability, and that this rating enhances confidence in the strength of the economy and its ability to grow and expand economically, accompanied by the positive results of the financial measures that have been approved over the past years, including the issuance of the Public Debt Law, which contributed to raising confidence in the methodology of the Ministry of Finance and the rules of governance of government companies, in addition to improving the investment environment.
He said that the government is committed to continuing to enhance public finance indicators and benefit from the financial surpluses achieved in increasing the gains reflected at the economic and social levels and that the results achieved came through the cooperation of all government units and partners from the private sector and civil society institutions.
The 'BBB-' rating at Standard & Poor's is the first level of investment-grade credit rating and represents a safe investment environment.
After seven years
The Sultanate of Oman has returned to this rating category after a gap of nearly 7 years (since 2017) as it was affected by the declining global oil prices and the COVID-19 pandemic.
It took the Sultanate of Oman two and a half years of commitment to implement the procedures to regain this rating.
Measures to improve public finances
The agency said in its report issued on Friday that the improvement in the credit rating is due to the continuation of measures to improve public finances through development initiatives and measures in the financial and economic aspects, and government restructuring measures that contributed to restoring the financial balance between revenues and public spending as planned in the medium-term financial plan and the beginning of achieving financial surpluses, in addition to the government's commitment to reducing the state's public debt, governance of government companies and reducing their indebtedness.
As a result of the rise in average oil prices and achieving positive results from the financial measures taken, the government was able to strengthen the state's financial position and provide flexibility to deal with any sudden external shocks.
Budget surpluses
The agency expects the state's general budget to achieve moderate financial surpluses of 1.9 percent during the period 2024-2027, assuming that the average price of Brent crude will reach about $80 per barrel during the period 2025-2027, which will allow the government to continue reducing the level of public debt and build financial reserves.
The agency also expected that real GDP (at constant prices) would grow by about 2 percent annually on average during 2024-2027, and the increase in average oil production until 2027 would continue to stimulate the growth of the non-oil sector by about 2 percent annually.
The agency also expected the current account to record financial surpluses on average at 1.2% of GDP from 2024-2027.
The agency explained that the Sultanate of Oman is committed to reducing the total public debt, as the agency expects it to reach 29 percent of GDP in 2027.
At the same time, the agency indicates that the average size of liquid monetary assets will remain at 36 percent of GDP until 2027.
The agency also indicated in its report that inflation is expected to remain moderate, averaging about 1.4 percent annually during the period 2024-2027, after reaching a low rate of 0.9 percent in 2023.
On the other hand, credit growth to the private sector expanded by a high rate of 4.9 percent in 2023, and the credit environment is expected to remain favorable, driving lending growth by about 5 to 6 percent annually.
Public sector companies
The report explained that government efforts in managing government public sector since 2020 have contributed to strengthening governance rules, enhancing operational efficiency, and improving financial conditions with an increase in corporate profitability and a decrease in debt rates.
The establishment of the Oman Energy Development Company (EDO) and the Integrated Gas Company (IGC) also contributed to improving the structure of government financial accounts by showing net government revenues after deducting expenses related to managing the oil and gas sectors.
Further improvement
The report stated that the credit rating of the Sultanate of Oman may witness further improvement over the next two years if the government continues to commit to managing the country’s public finances as planned to increase non-oil revenues and raise the efficiency of public spending, which it is hoped will continue to drive GDP growth supported by continued momentum in the growth of non-oil sector activities, in addition to continuing measures aimed at enhancing the establishment and growth of companies and projects that support economic diversification activities and operations, in addition to initiatives to develop the capital market sector.
Public Debt Law
Sultan bin Salem al Habsi, Minister of Finance, pointed out that the Standard & Poor's report raising the credit rating of the Sultanate of Oman confirms that the government is on its way to achieving the national goals of restoring financial balance and achieving financial sustainability, and that this rating enhances confidence in the strength of the economy and its ability to grow and expand economically, accompanied by the positive results of the financial measures that have been approved over the past years, including the issuance of the Public Debt Law, which contributed to raising confidence in the methodology of the Ministry of Finance and the rules of governance of government companies, in addition to improving the investment environment.
He said that the government is committed to continuing to enhance public finance indicators and benefit from the financial surpluses achieved in increasing the gains reflected at the economic and social levels and that the results achieved came through the cooperation of all government units and partners from the private sector and civil society institutions.