Moody’s upgrades Oman to Ba2 with positive outlook

Due to decline in public debt burden and ability to meet financial obligations
Moody’s upgrades Oman to Ba2 with positive outlook
Oman economy

Moody’s on Monday raised Oman’s credit rating from “Ba3” to “Ba2” while maintaining a positive outlook, as a result of the decline in public debt burdens and the improvement in the Sultanate’s ability to meet its financial obligations during 2022.

The agency attributed this improvement, along with the increase in public revenues, to “the tangible efforts made by the government in controlling financial conditions, and its decision to direct fiscal surpluses towards reducing public debt, noting the improvement in the effectiveness of fiscal policy and the efficiency of financial governance.”

The International Monetary Fund has predicted that the Sultanate of Oman will achieve the highest economic growth rate in the Arab countries next year, at a rate of 5.2 percent next year.

Read: Saudi-Oman trade skyrocketed by 123% to $7.1 bn in 2022

The World Bank also predicted that Oman will be the fastest-growing economy in the GCC in 2023, with growth expected to reach 4.3 percent.

The World Bank says the government’s efforts to reform its budget and reduce total debt to 40 percent of GDP in 2022 from about 60 percent in 2021 have contributed to the country’s positive outlook.

Data released last week showed Oman posted a budget surplus of $1.2 billion in the first quarter, driven by a 9 percent rise in net oil revenues due to higher oil prices and production.

“Government efforts have had a tangible impact on maximizing fiscal surpluses, and more than 15 percent of total public debt declined during 2022, down from 68 percent in 2020 to 40 percent in 2022 as a percentage of GDP,” Moody’s said in its report.

It pointed out that “the positive outlook reflects the continued improvement of the public debt rate over the next few years despite the decline in oil prices, by maintaining the level of spending control and taking more financial development measures.”

“Despite achieving additional fiscal revenues in 2022, the government maintained the level of spending,” the agency said, noting that it “conducted an assessment on the shift in the government’s approach to managing fiscal policy during the period of high oil prices, confirming the unprecedented improvement in the effectiveness of fiscal policy and management, which will strengthen the credit position of the Sultanate of Oman in the medium and long term.”

“The medium-term fiscal plan and initiatives to boost non-oil revenues have contributed to this improvement,” the agency said, praising the removal of most of the oil-related spending from the state budget, “which would contribute to reducing the financial risks resulting from oil price fluctuations.”

Oil prices


The IEA expects oil prices to average between $80 and $85 per barrel in 2023-2024, and that the green hydrogen sector will contribute to reducing the risks associated with long-term credit rating as a result of the global trend towards carbon neutrality.

“There is growing confidence that the improvement in financial indicators during 2022 will continue in the medium term, which will contribute to raising the credit rating, stressing that the level of Oman’s credit rating is unlikely to decline in the near term,” it said.

“This confidence comes from the government’s continuation of measures to adjust financial conditions, which led to an improvement in the financial balance and enhanced its ability to deal with future oil market fluctuations,” it said.

Rating agency Standard & Poor’s has also revised the outlook for the Sultanate from stable to positive.

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