Fitch Ratings recently revised Oman’s outlook from “Stable” to “Positive” while affirming its Long-Term Foreign-Currency Issuer Default Rating at ‘BB+’.
This shift reflects a series of economic and fiscal measures that underscore the Sultanate’s resilience and adaptability in a challenging global landscape.
A pivotal factor in Fitch’s assessment is Oman’s improving fiscal metrics. The government and state-owned entities (SOEs) have significantly reduced debt relative to GDP, while net external debt has declined.
Additionally, the accumulation of sovereign foreign assets indicates greater fiscal prudence, with Oman now demonstrating a consistent ability to manage its public finances effectively.
The fiscal break-even oil price has been brought down to below $70 per barrel, showcasing the success of budgetary reforms. The country now possesses a more robust arsenal of fiscal tools, enhancing its capacity to respond to economic shocks.
Oman’s balanced budgetary position stands as a testament to its strategic financial planning. While the budget surplus is expected to narrow to 0.7 per cent of GDP in 2025, Fitch projects only a minor deficit of 0.2 per cent in 2026. This projection aligns with Brent oil prices averaging $70 per barrel in 2025 and $65 in 2026.
Key reforms include a continued focus on moderating spending and improving tax collection. The introduction of VAT and progress toward implementing personal income tax signify steps toward diversifying revenue streams beyond oil. Moreover, expenditure on social safety nets and subsidy reforms reflect a balanced approach to supporting vulnerable segments while controlling fiscal outflows.
A significant achievement is the stabilization of Oman’s government debt, projected to fall to 34 per cent of GDP by the end of 2024 and further to 33.3 per cent by 2026. The reduction of external debt by $2.8 billion in 2024 underscores this trend. Efforts to increase reliance on domestic debt, supported by a growing local market, further bolster fiscal resilience.
Oman’s external balance sheet is increasingly robust, with government and SOE debt repayments mitigating liquidity risks. The country has transitioned from being a net external debtor in 2020 (-9 per cent of GDP) to a net foreign asset holder (10 per cent of GDP in 2024).
These improvements are projected to stabilise net external debt levels at 13 per cent of GDP over the next two years.
The non-oil economy remains a bright spot, with growth rates exceeding 3 per cent annually in 2025 and 2026, driven by domestic consumption, foreign investment, and tourism.
These sectors play a critical role in reducing the government’s dependency on hydrocarbon revenues and fostering long-term economic sustainability.
Oman scores high in governance metrics such as regulatory quality and control of corruption, contributing positively to its credit profile.
However, there is room for improvement in areas like voice and accountability.
The “Positive” outlook signals Fitch’s confidence in Oman’s trajectory.
Key factors for potential upgrades include sustained fiscal prudence, enhanced external buffers, and robust non-oil sector growth. Conversely, a reversal of these trends or an increase in government debt could lead to downgrades.
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