S&P upgrades Oman’s credit rating to ‘BBB-’
S&P Global Ratings upgraded Oman’s long-term foreign and local currency sovereign credit ratings from ‘BB+’ to ‘BBB-’ on September 27, 2024, reflecting the country’s progress in reducing public and state-owned enterprise (SOE) balance sheet leverage.
“The upgrade reflects continued strengthening of the Omani government’s public finances and ongoing external deleveraging of many SOEs.” S&P explained.
“Following significant deterioration in the balance sheet over 2015-2021, the government has implemented structural reforms that will see it return to a net asset position from this year.”
Oman is projected to maintain a small net general government asset position by the end of 2024, compared to a net debt of 19 per cent in 2021. The short-term credit ratings were also raised from ‘B’ to ‘A-3’.
Oman’s fiscal reforms, which include the introduction of a personal income tax and a reduced reliance on hydrocarbon revenues, are anticipated to result in a 1.9 per cent fiscal surplus through 2027, assuming Brent oil prices remain at $80 per barrel.
The stable outlook balances reform-driven economic growth against risks from oil price volatility. Future rating upgrades could occur if reforms lead to an increase in GDP per capita. Conversely, delays in implementing fiscal measures or external shocks could inflate fiscal deficits, posing downside risks to the credit rating.
“We could raise the ratings over the next two years if reforms lead to steady growth in Oman’s GDP per capita supported by continued momentum in non-oil growth. Measures to strengthen institutions that, for example, support economic diversification and the development of domestic capital markets, could be positive for the ratings.” S&P said.
“We could lower the ratings if fiscal and economic reform implementation were to slow, or an unfavorable external environment such as a terms of trade shock were to result in fiscal deficits and net debt levels significantly above our forecasts.”
Attribution: S&P Global Ratings
Subediting: Y.Yasser
