Saturday 28 / September / 2024
Muscat: Standard & Poor's Global Ratings (S&P) raised its second credit rating report on the Sultanate of Oman to ‘BBB-’ from ‘BB+’ with a stable outlook, as a result of the country's improved financial performance.
The rating upgrade by S&P's represents a safe investment environment and Oman has returned to this rating category for the first time since 2017 due to the effects of the crises resulting from the decline in global oil prices and the COVID-19 pandemic. The Sultanate of Oman just took two and a half years of commitment to to regain this rating.
Also on Friday, S&P raised Oman’s its short-term ratings on Oman to 'A-3' from 'B' and the transfer and convertibility assessment to 'BBB' from 'BBB-'.
“The upgrade reflects continued strengthening of the Omani government's public finances and ongoing external deleveraging of many state-owned enterprises (SOEs),” S&P Global said it its latest report.
The agency said in its report that the improvement in the credit rating was due to the continuation of measures to improve public finances through development initiatives and measures in the financial and economic aspects. Government’s restructuring measures have also contributed to restoring the financial balance between revenues and public spending as planned in the Medium-Term Fiscal Plan (MTFP).
As a result of the rise in average oil prices and achieving positive results from the financial measures taken, the government was able to strengthen the state's financial position and provide flexibility to deal with any sudden external shocks.
The international rating agency expects the Oman’s general budget to achieve moderate financial surpluses of 1.9 percent during the period 2024-2027, assuming the average price of Brent crude will reach about $80 per barrel during the period 2025-2027, which will allow the government to continue reducing the level of public debt and build financial reserves.
The agency also expected that real GDP (at constant prices) would grow by about 2 percent annually on average during the period 2024-2027, and the increase in average oil production until 2027 would continue to stimulate the growth of the non-oil sector by about 2 percent annually.
The agency also expected that the current account would record financial surpluses on average by 1.2 percent of GDP during the period 2024-2027. It explained that the Sultanate of Oman is committed to reducing the total public debt to reach 29 percent of GDP in 2027.
S&P further said that the average size of liquid monetary assets will remain at 36 percent of GDP until 2027. The agency also indicated in its report that inflation is expected to remain moderate, averaging about 1.4 percent annually during the period 2024-2027, after reaching a low rate of 0.9 percent in 2023.
On the other hand, the growth of credit granted to the private sector expanded by at an hefty rate of 4.9 percent in 2023, and the credit environment is expected to continue to be favourable, which will drive lending growth by about 5 percent to 6 percent annually.
The S&P report further highlighted that government’s efforts in managing government companies since 2020 have clearly contributed to strengthening governance rules, enhancing operational efficiency, and improving financial conditions by increasing the profitability rate of companies and decreasing debt rates.
The establishment of the Oman Energy Development Company (EDO) and the Integrated Gas Company (IGC) also contributed to improving the structure of government financial accounts by showing net government revenues after deducting expenses related to managing the oil and gas sectors.
The report stated that the credit rating of the Sultanate of Oman may witness further improvement over the next two years if the government continues to commit to managing the country’s public finances as planned to increase non-oil revenues and raise the efficiency of public spending, which it is hoped will continue to drive GDP growth supported by continued momentum in the growth of non-oil sector activities, in addition to continuing measures aimed at enhancing the establishment and growth of companies and projects that support economic diversification activities and operations, in addition to initiatives to develop the capital market sector.
Sultan bin Salem Al Habsi, Minister of Finance, said that the Standard & Poor's report on raising the creditworthiness of Oman confirms that the government is on its way to achieve the national goals of restoring financial balance and achieving financial sustainability.
“This rating enhances confidence in the strength of the economy and its ability to grow and expand economically, accompanied by the positive results of the financial measures that have been approved over the past years. These include, among others, the issuance of the Public Debt Law, which contributed to raising confidence in the methodology of the Ministry of Finance and the rules of governance of government companies, in addition to improving the investment environment,” he said.
His Excellency stressed in a statement to the Oman News Agency that the government is committed to continuing to enhance public finance indicators and benefit from the financial surpluses achieved in increasing the gains reflected at the economic and social levels, and that the results achieved came through the cooperation of all government units and partners from the private sector and civil society institutions.
