S&P upgrades Oman’s credit rating to 'BBB-'

MUSCAT: Standard & Poor's (S&P) has upgraded Oman’s sovereign credit rating from "BB+" to "BBB-", marking a significant return to investment-grade status after nearly seven years of being rated below investment grade. The upgrade reflects Oman’s improving financial outlook and its success in addressing the economic challenges brought on by the global oil price decline and the Covid-19 pandemic.

The new "BBB-" rating places Oman back in the lowest tier of the investment-grade category, signaling a safer environment for investors. According to S&P, the upgrade is a direct result of Oman’s commitment to economic reforms aimed at strengthening public finances, increasing fiscal surpluses, and reducing public debt. The stable outlook associated with the rating suggests confidence in the country’s ability to maintain this progress over the medium term.

The report highlights key achievements, including the government’s efforts to balance revenue and expenditure through a medium-term fiscal plan. Initiatives aimed at reducing the state's public debt and improving governance within state-owned enterprises have played a significant role in bolstering Oman’s financial position. The establishment of entities like the Oman Energy Development Company (EDO) and the Integrated Gas Company (IGC) helped streamline the management of revenues and expenses in the oil and gas sectors, making the financial structure more transparent and efficient.

The agency expects Oman to achieve moderate fiscal surpluses of about 1.9% of GDP annually from 2024 to 2027, assuming an average oil price of $80 per barrel. These surpluses will enable Oman to continue reducing its public debt levels and build financial reserves, providing flexibility in managing future economic shocks. By 2027, the agency forecasts Oman’s total public debt will decrease to 29% of GDP.

Real GDP growth is projected to average around 2% per year over the same period, driven by higher oil production and growth in the non-oil sectors. Additionally, the report expects Oman’s current account to maintain an average surplus of 1.2% of GDP from 2024 to 2027, further reinforcing the country’s financial stability.

S&P also noted that Oman has successfully curbed inflation, which is expected to average just 1.4% annually during the forecast period. After a low inflation rate of 0.9% in 2023, the country remains on track to keep price increases moderate, thanks to prudent economic management. Meanwhile, credit growth in the private sector is expected to remain strong, supporting economic expansion through increased lending, which is projected to rise by 5% to 6% annually.

Oman’s Finance Minister Sultan bin Salem al Habsi stated that the improved credit rating is a testament to the government’s efforts to restore fiscal balance and achieve financial sustainability. He highlighted the positive impact of measures such as the Public Debt Law and the restructuring of government companies, which have improved operational efficiency and enhanced investor confidence.

Al Habsi emphasized that the government remains committed to continuing reforms and utilizing financial surpluses to drive broader economic and social gains, with strong cooperation from both the private sector and civil society institutions.