Saturday 28 / September / 2024
MUSCAT: Oman is making remarkable strides toward economic resilience and investor confidence, as underlined by its recent credit rating upgrades.
Standard & Poor’s has raised Oman’s credit rating from BB+ to BBB-, with a stable outlook, a move that signifies the nation’s robust financial stability and commitment to its Vision 2040 strategy.
Dr. Nasser bin Rashid Al Maawali, Undersecretary of the Ministry of Economy, hailed this rating enhancement as a significant milestone, underscoring Oman’s relentless efforts to fortify its economic foundations amidst global challenges. Dr. Al Maawali emphasised that the improved rating reflects a culmination of strategic financial management and successful implementation of economic policies.
Supported by rising oil prices, Oman has adeptly navigated its fiscal landscape, resulting in a notable reduction in public debt, which has declined from a peak of OMR15.3 billion in 2020 to OMR 14.4 billion by mid-2024.
With Standard & Poor’s projecting a debt-to-GDP ratio decrease to 29% by 2027, Oman is on a clear path to sustainable financial health.
Financial transformation through strategic planning
Dr. Al Maawali credited the leadership’s directives and Oman’s strategic financial management for the nation’s transformation.
The Ministry of Finance’s proactive measures, such as replacing high-cost loans and utilising additional oil revenues for debt repayment, have effectively reduced the public debt burden.
As of mid-2024, public debt stands at OMR 14.4 billion, nearing safe limits that mitigate financial risks.
“The improvement in Oman’s credit rating showcases a significant financial and economic turnaround since the implementation of Oman Vision 2040. The nation has recovered from the challenges posed by declining oil prices and the pandemic in 2020,” Dr. Al Maawali said.
Continued economic growth and diversification
The Undersecretary pointed out that Oman’s financial stability is a result of robust economic policies and the ongoing implementation of the Tenth Five-Year Plan (2021-2025).
Programmes such as the Public Finance Management System and the Local Added Value programme have played a critical role in reducing expenditures while increasing financial efficiency.
Dr. Al Maawali noted that Oman’s GDP is expected to grow steadily over the next two years, driven by the expansion of non-oil sectors and successful diversification initiatives.
Sectors such as green hydrogen and industrial projects are gaining momentum, contributing to sustainable economic growth and enhancing Oman’s investment appeal.
Social and economic progress
Oman has also made significant strides in improving citizens’ quality of life. Public spending has been directed toward essential services, including subsidies for fuel, electricity, water, and basic commodities. Additionally, development projects, particularly those supporting housing loans and social protection, have boosted living standards.
In line with Vision 2040, Oman continues to foster economic decentralisation through governorate-level projects, contributing to regional development and broadening economic participation.
Positive outlook from global institutions
Dr. Al Maawali referenced reports from international organisations such as the International Monetary Fund (IMF), which highlighted Oman’s strong financial management and public finance surplus. The IMF report confirmed that Oman’s fiscal surplus reached 2.2% of GDP in 2023, with a current account surplus of 5% in 2022.
Moreover, Oman’s trade surplus, bolstered by oil export revenues and growing non-oil exports, reached OMR 7.7 billion in 2023.
The country’s sovereign and foreign assets have also grown significantly, with the Oman Investment Authority (OIA) holding over OMR 19 billion in assets by the end of last year.
Looking forward, Oman’s financial sustainability is further supported by favourable global trends, including the potential for reduced inflation and lower interest rates, as well as anticipated adjustments to oil production.
As a member of OPEC+, Oman has balanced its oil production in alignment with global supply goals, while continuing to expand non-oil sectors, which grew by 4.5% in the first quarter of 2024.
Credit rating impact on investment growth
Dr. Salem bin Abdullah Al Sheikh, the official spokesman for the Ministry of Economy, further contextualised these ratings within the broader economic framework of Oman.
He explained that the financial stability and continuous rise in credit ratings have led to a tangible increase in the volume of foreign direct investments (FDIs).
“Our target under the Tenth Five-Year Plan is to raise investment rates to 27% of GDP by 2025, and we are making significant progress toward this goal,” he stated.
Foreign direct investments
Statistics reveal a consistent increase in Oman’s cumulative volume of foreign direct investments, which rose from OMR 20.6 billion at the end of 2022 to approximately OMR 25.4 billion by the end of the first quarter of this year. This includes OMR 19.9 billion from oil and gas activities and OMR 5.5 billion from non-oil economic sectors.
Dr. Al Sheikh highlighted that the business environment in Oman has improved significantly due to legislative advancements aimed at facilitating investment procedures, reducing costs, and expanding digital services.
“Within the framework of the objectives of the Tenth Plan, we have made continuous improvements in the investment landscape, which is crucial for attracting more foreign direct investments,” he noted.
One of the initiatives introduced this year to bolster investment is an incentive programme for the private sector, designed to encourage companies to participate in the Muscat Stock Exchange.
“This programme provides various incentives, exemptions, and facilities for private companies, enabling them to access financing opportunities and expand their operations,” Dr. Al Sheikh added.
The officials also stressed that the rise in Oman’s credit ratings enhances investor confidence and reflects the effective management of public debt. He said that public debt has decreased significantly, now standing at OMR 14.4 billion, which is a remarkable reduction from previous years.
“The prudent financial policies have been effective in leveraging additional oil revenues to accelerate debt repayment, which has led to a decline in the debt-to-GDP ratio to below 35%,” he explained.
Future optimistic
Looking ahead, Al Maawali expressed optimism for the future, reiterating that the Tenth Five-Year Plan is instrumental in achieving Oman Vision 2040, which aims for comprehensive development and improved living standards for citizens.
Al Maawali added, “Our government is committed to maintaining a stable and attractive investment climate, which is crucial for our long-term economic sustainability. The rise in our credit ratings is not just a number; it is a reflection of our collective efforts and vision for the future.”
This collaborative approach among various government sectors marks a pivotal step toward sustained economic growth and positions Oman as a competitive player in the global market. The ongoing implementation of strategic programmes under the Tenth Five-Year Plan will continue to enhance financial sustainability and further improve Oman’s credit ratings, paving the way for a prosperous future.
