Increase in FDIs due to high credit ratings: MOE
Published: 09:09 AM,Sep 28,2024 | EDITED : 01:09 PM,Sep 28,2024
Muscat - The Ministry of Economy said that the continuous rise in the credit rating reflects the progress achieved by the Sultanate of Oman in improving its financial and economic indicators and increasing its competitiveness and investment attractiveness.
The rise in the credit rating is one of the urgent national priorities that the Sultanate of Oman has succeeded in achieving, and through which it has achieved many positive results such as the strengthening the financial position of the state and increasing confidence in the safe and attractive environment for investment in the Sultanate of Oman, reducing the cost of borrowing and achieving financial savings from the cost of servicing future debts, which will positively reflect on the prospects of financial and economic sustainability.
The Ministry of Economy indicated that the improvement in the credit rating to an attractive level for investment after Standard & Poor's raised the Sultanate of Oman's rating to BBB- comes in conjunction with the continuous and important achievements made by the Sultanate of Oman in enhancing its competitiveness and raising its position in international indicators and classifications such as the Global Innovation Index, the Economic Freedom Index, the Competitive Industrial Performance Index, the Environmental Performance Index, and other indicators.
Increase in FDIs
Dr. Salem bin Abdullah al Sheikh, the official spokesman for the Ministry of Economy, said that the financial stability and the improvements in the credit rating of the Sultanate of Oman contributed to the tangible increase in the volume of foreign direct investments (FDIs) and progress towards achieving the targets of the tenth five-year plan to increase investment rates to the gross domestic product to reach the equivalent of 27 percent and enhance national savings rates by stimulating the private sector and attracting more investments to achieve the desired investment goals by increasing the volume of foreign direct investments to the equivalent of 10.9 percent of the gross domestic product by the end of the implementation period of the tenth plan in 2025.
Statistics monitor a continuous increase in the total cumulative volume of foreign direct investments in the Sultanate of Oman, which increased from 20.6 billion Omani riyals at the end of 2022 to about 25.4 billion Omani riyals by the end of the first quarter of this year, including RO19.9 billion from direct investments in oil and gas activities and RO5.5 billion from investments in non-oil economic sectors.
The official spokesman for the Ministry of Economy added that within the framework of the objectives of the tenth plan to enhance local investment, the business environment in the Sultanate of Oman has witnessed continuous improvement over the past years through the development of legislation and significant progress in facilitating and simplifying investment procedures, reducing business costs, and expanding the offering of investment opportunities and digital services to investors.
Incentives for the private sector
One of the important initiatives launched by the Sultanate of Oman during the current year to enhance investment came through the incentive program for the private sector, which provides incentives, exemptions, and facilities to encourage private companies wishing to benefit from the program to join the Muscat Stock Exchange through public subscription or listing on the closed market or the promising companies market that will be launched in the coming months to enhance the presence of private companies, entrepreneurs and emerging companies in the capital market, and increase their benefit from financing opportunities and expansion of their activities provided by this market.
The strategic programs implemented within the tenth five-year plan also include to enhance and diversify lending portfolios, which presented qualitative initiatives to support local and foreign investment and encourage emerging companies by establishing the Oman Future Fund and raising the capital of the Development Bank. These initiatives will have positive results during the coming period by increasing investment in diversification sectors and supporting entrepreneurship projects.
Decline in public debt
The official spokesman for the Ministry of Economy added that the rise in the rating enhances the growing confidence of investors in the prospects of sustainability in the Sultanate of Oman with the sharp decline in the size of public debt and in the risks surrounding the country's financial position, which led to a reduction in the credit rating to negative levels and an increase in the cost of external borrowing.
Prudent financial policies have been effective in exploiting additional oil revenues to accelerate the repayment of public debt, which led to a sharp decline in its size, which decreased to RO14.4 billion during the current year, and its percentage of the gross domestic product decreased to less than 35 percent, after it had exceeded 67 percent in 2020 and 61 percent in 2021.
The continuous improvement in the credit rating contributed to reducing the cost of financing, as the yield curve on the Sultanate of Oman's sovereign issuances in global markets witnessed a significant decline during the past and current years to reach the same levels prevailing in the region.
Repayment of loans
This has enabled the proactive repayment of some loans and the replacement of some loans with others with a lower financing cost, which achieved significant savings in the cost of future burdens of public debt, and contributed to The size of public debt service allocations in the general budget declined to RO1.044 billion during the past year, compared to RO1.076 billion in 2022.
The size of public debt allocations also witnessed a 10 percent decrease during the first half of this year to reach RO447 million. The future savings in the cost of debt service support the effectiveness of programs and initiatives to improve the performance indicators of the general budget, which included rationalizing and raising the efficiency of government spending, restructuring the budget by transferring oil and gas expenditures outside the budget, and creating new items in the budget that enhance development and social spending, including allocations for projects with a developmental impact, allocations for the social protection system item, and allocations for debt repayment item.
Spending on social programs
Al Sheikh stressed that the strength of the state's financial position has enhanced its capabilities in implementing economic and social priorities, and contributed to maintaining spending levels on basic services such as health, education and housing, and expanding support for services whose costs affect citizens' livelihoods.
Allocations for the contributions and other expenditures item in the general budget have been increased since 2022 in light of the implementation of government economic, financial and social measures to contain inflation and mitigate the consequences of global crises on citizens. In the 2024 fiscal year budget, allocations for this item witnessed a 40 percent increase during the first half of this year compared to the same period last year, reaching 1.088 billion Omani riyals, including support for electricity, water and other services, in addition to RO280 million to support the social protection system, which began to be implemented at the beginning of this year and represents an important development in expanding the umbrella of protection for segments of society.
Decentralisation
The Sultanate of Oman is also making progress in enhancing local development and moving towards decentralization by establishing the Governorates Development Program, which came in implementation of the royal directives to allocate RO20 million riyals to each governorate during the years of the tenth five-year plan (2021-2025) starting in 2022.
The program represents an important pillar for enhancing the tributaries of economic growth, achieving a balanced development, providing job opportunities, and improving the standard of living and sources of income for citizens.
The official spokesman for the Ministry of Economy added that given the negative impact of the credit rating downgrade on economic growth, investor confidence, increased borrowing costs and the risks of worsening the financial deficit, increasing debt and imbalances in internal and external balances, the success of the Sultanate of Oman in improving its credit rating within this short period of time is an important achievement and confirms its success in exploiting its financial resources and its ability to overcome risks and achieve a balance between achieving the ambitious goals of Oman’s future vision and the requirements of financial stability, which has greatly enhanced the flexibility of the economy in adapting to a global environment full of challenges, affected growth rates in many countries and limited foreign direct investment flows worldwide.
The rise in the credit rating is one of the urgent national priorities that the Sultanate of Oman has succeeded in achieving, and through which it has achieved many positive results such as the strengthening the financial position of the state and increasing confidence in the safe and attractive environment for investment in the Sultanate of Oman, reducing the cost of borrowing and achieving financial savings from the cost of servicing future debts, which will positively reflect on the prospects of financial and economic sustainability.
The Ministry of Economy indicated that the improvement in the credit rating to an attractive level for investment after Standard & Poor's raised the Sultanate of Oman's rating to BBB- comes in conjunction with the continuous and important achievements made by the Sultanate of Oman in enhancing its competitiveness and raising its position in international indicators and classifications such as the Global Innovation Index, the Economic Freedom Index, the Competitive Industrial Performance Index, the Environmental Performance Index, and other indicators.
Increase in FDIs
Dr. Salem bin Abdullah al Sheikh, the official spokesman for the Ministry of Economy, said that the financial stability and the improvements in the credit rating of the Sultanate of Oman contributed to the tangible increase in the volume of foreign direct investments (FDIs) and progress towards achieving the targets of the tenth five-year plan to increase investment rates to the gross domestic product to reach the equivalent of 27 percent and enhance national savings rates by stimulating the private sector and attracting more investments to achieve the desired investment goals by increasing the volume of foreign direct investments to the equivalent of 10.9 percent of the gross domestic product by the end of the implementation period of the tenth plan in 2025.
Statistics monitor a continuous increase in the total cumulative volume of foreign direct investments in the Sultanate of Oman, which increased from 20.6 billion Omani riyals at the end of 2022 to about 25.4 billion Omani riyals by the end of the first quarter of this year, including RO19.9 billion from direct investments in oil and gas activities and RO5.5 billion from investments in non-oil economic sectors.
The official spokesman for the Ministry of Economy added that within the framework of the objectives of the tenth plan to enhance local investment, the business environment in the Sultanate of Oman has witnessed continuous improvement over the past years through the development of legislation and significant progress in facilitating and simplifying investment procedures, reducing business costs, and expanding the offering of investment opportunities and digital services to investors.
Incentives for the private sector
One of the important initiatives launched by the Sultanate of Oman during the current year to enhance investment came through the incentive program for the private sector, which provides incentives, exemptions, and facilities to encourage private companies wishing to benefit from the program to join the Muscat Stock Exchange through public subscription or listing on the closed market or the promising companies market that will be launched in the coming months to enhance the presence of private companies, entrepreneurs and emerging companies in the capital market, and increase their benefit from financing opportunities and expansion of their activities provided by this market.
The strategic programs implemented within the tenth five-year plan also include to enhance and diversify lending portfolios, which presented qualitative initiatives to support local and foreign investment and encourage emerging companies by establishing the Oman Future Fund and raising the capital of the Development Bank. These initiatives will have positive results during the coming period by increasing investment in diversification sectors and supporting entrepreneurship projects.
Decline in public debt
The official spokesman for the Ministry of Economy added that the rise in the rating enhances the growing confidence of investors in the prospects of sustainability in the Sultanate of Oman with the sharp decline in the size of public debt and in the risks surrounding the country's financial position, which led to a reduction in the credit rating to negative levels and an increase in the cost of external borrowing.
Prudent financial policies have been effective in exploiting additional oil revenues to accelerate the repayment of public debt, which led to a sharp decline in its size, which decreased to RO14.4 billion during the current year, and its percentage of the gross domestic product decreased to less than 35 percent, after it had exceeded 67 percent in 2020 and 61 percent in 2021.
The continuous improvement in the credit rating contributed to reducing the cost of financing, as the yield curve on the Sultanate of Oman's sovereign issuances in global markets witnessed a significant decline during the past and current years to reach the same levels prevailing in the region.
Repayment of loans
This has enabled the proactive repayment of some loans and the replacement of some loans with others with a lower financing cost, which achieved significant savings in the cost of future burdens of public debt, and contributed to The size of public debt service allocations in the general budget declined to RO1.044 billion during the past year, compared to RO1.076 billion in 2022.
The size of public debt allocations also witnessed a 10 percent decrease during the first half of this year to reach RO447 million. The future savings in the cost of debt service support the effectiveness of programs and initiatives to improve the performance indicators of the general budget, which included rationalizing and raising the efficiency of government spending, restructuring the budget by transferring oil and gas expenditures outside the budget, and creating new items in the budget that enhance development and social spending, including allocations for projects with a developmental impact, allocations for the social protection system item, and allocations for debt repayment item.
Spending on social programs
Al Sheikh stressed that the strength of the state's financial position has enhanced its capabilities in implementing economic and social priorities, and contributed to maintaining spending levels on basic services such as health, education and housing, and expanding support for services whose costs affect citizens' livelihoods.
Allocations for the contributions and other expenditures item in the general budget have been increased since 2022 in light of the implementation of government economic, financial and social measures to contain inflation and mitigate the consequences of global crises on citizens. In the 2024 fiscal year budget, allocations for this item witnessed a 40 percent increase during the first half of this year compared to the same period last year, reaching 1.088 billion Omani riyals, including support for electricity, water and other services, in addition to RO280 million to support the social protection system, which began to be implemented at the beginning of this year and represents an important development in expanding the umbrella of protection for segments of society.
Decentralisation
The Sultanate of Oman is also making progress in enhancing local development and moving towards decentralization by establishing the Governorates Development Program, which came in implementation of the royal directives to allocate RO20 million riyals to each governorate during the years of the tenth five-year plan (2021-2025) starting in 2022.
The program represents an important pillar for enhancing the tributaries of economic growth, achieving a balanced development, providing job opportunities, and improving the standard of living and sources of income for citizens.
The official spokesman for the Ministry of Economy added that given the negative impact of the credit rating downgrade on economic growth, investor confidence, increased borrowing costs and the risks of worsening the financial deficit, increasing debt and imbalances in internal and external balances, the success of the Sultanate of Oman in improving its credit rating within this short period of time is an important achievement and confirms its success in exploiting its financial resources and its ability to overcome risks and achieve a balance between achieving the ambitious goals of Oman’s future vision and the requirements of financial stability, which has greatly enhanced the flexibility of the economy in adapting to a global environment full of challenges, affected growth rates in many countries and limited foreign direct investment flows worldwide.