International agency upgrades Omani credit rating

Moody's credit rating agency today raised its credit rating for the Sultanate from “Ba3” to “Ba2”, with a positive outlook for Oman's economy

The step comes as a result of the decline in Oman’s indebtedness, as well as the improvement in Oman's ability to meet its financial obligations during the year 2022.

The agency attributes this improvement both to the increase in public revenues and the tangible efforts made by the Government to control financial conditions.

The progress reflects the soundness of the Government’s decision to channel financial surpluses into public debt reduction. It referred to sustained improvement in the effectiveness of fiscal policy and the efficiency of financial governance.

In its credit rating report, Moody's stated that government efforts had a tangible impact on maximising fiscal surpluses. It noted that Oman’s measures led to a 15% decline in total public debt during 2022. It noted a downward trend in debt that brought debts down from 68% of GDP in 2020 to 40 percent in 2022.

The international agency pointed out that the positive future outlook promises sustained improvement  in the public debt reduction rate over the next few years, despite the decline in oil prices, provided that the level of spending is kept under control and that more developed financial measures are endorsed.

The agency praised the achievement of the Government in maintaining a controlled level of spending, despite additional financial revenues in 2022.

Moody’s noted the shift in the Government's approach to managing fiscal policy during a period of high oil prices, stressing the effectiveness of Oman’s new policy. It said that Oman's management had improved in an unprecedented manner and that it will enhance the credit position of the Sultanate of Oman in the medium and long term.

The agency said that the Medium-Term Fiscal Plan and initiatives undertaken by Oman to enhance non-oil revenues contributed to this improvement. The agency commended the removal of expenses associated with the oil sector from the state's general budget. It said this will contribute to reducing financial risks that result from fluctuations in oil prices.

The agency projects that oil prices will average between $80 and $85 per barrel during 2023 and 2024. It expects that the green hydrogen sector will contribute to cutting down the risks associated with Oman's long-term credit rating, due the global trend towards carbon neutrality.

Moody’s said there is increasing confidence that the 2022 improvement in financial indicators will prevail in the medium term. This, it noted, would help raise Oman's credit rating, stressing that the Sultanate’s rating is unlikely to decline in the near future.

Moody's confirmed that this confidence comes from the Government  continuing with fiscal control measures that promote  financial balance and consolidate the country’s ability to address future oil market fluctuations.

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