Oman's credit rating upgraded

The US credit rating agency Fitch today upgraded the rating of the Sultanate of Oman to “BB+”, with a stable outlook.

Fitch said that a key factor in the upgrade was the Omani government’s sustained enforcement of measures to keep fiscal conditions under control, in response to the decline of oil prices from the $80-90 (per barrel) break-even point during the period from 2017 to 2019 to less than $70 per barrel in 2023.

This significantly contributed to decreasing vulnerability to oil price fluctuations despite continued risks from oil markets, according to the international agency.

Fitch commends the government's commitment to its measures to maintain control over public spending, using additional oil revenues to cut down the state’s public debt and manage the Sultanate's lending portfolio.

Current spending is set to grow in line with gross domestic product (GDP). Fitch expects GDP to grow by 2.1 percent in 2023 and 2.7 percent in 2024.

Fitch also expects that the non-oil sector will grow by about 2.7 percent during 2023. It noted that the construction sector is beginning to recover after Covid-19.

The Agency said that investments in the  renewable energy and hydrogen sectors are expected to spur growth from 2025.

Fitch also projects that the state’s general budget will achieve a financial surplus of about 4.1 percent in 2023, 2.4 percent in 2024, and 1 percent in 2025.

In its report, the Agency says that it expects public debt, as a ratio to GDP, to decline to about 36 percent during 2023 and to stabilise at 35 percent during 2024 and 2025,. This compares to previous forecasts that public debt would reach about 45 percent in 2023.

Fitch also praises the Omani government’s management of public debt, and its taking advantage of additional revenues to repay some foreign loans prior to their maturity. The Agency says this has reduced the risks of external financial liquidity pressures.

The Agency expects that the rate of net foreign assets will revert back to its original positive standing and that foreign cash reserves will grow at a moderate mode during the remainder of 2023.

It added that the credit rating of the Sultanate of Oman may rise, if external public debt, as a ratio to GDP, continues to decline and if net sovereign foreign assets continue to improve.

Fitch Ratings Inc. is one of the “Big Three credit rating agencies”, the other two being Moody's and Standard & Poor's. It is one of the three nationally recognised statistical rating organizations designated by the U.S. Securities and Exchange Commission in 1975.

This is an unofficial English version of an Arabic report. To view the official Arabic text, click here.