Muscat – S&P Global Ratings on Saturday revised its outlook on Oman to ‘positive’ from ‘stable’ as the world’s biggest ratings agency now believes that the sultanate’s reforms programme and higher oil prices will narrow fiscal deficits and slow the increase in government debt.
S&P has also affirmed the sultanate’s ‘B+/B’ long- and short-term foreign and local currency sovereign credit ratings.
‘Economic and fiscal pressures on Oman are easing, as the effects of sharp drop in oil prices in 2020 and the COVID-19 pandemic abate. We project that Oman’s reform programme will reduce the pace of net government debt accumulation over the next three years,’ S&P said in a research update report.
The ratings agency said it could raise its ratings on Oman over the next 12 months if planned fiscal reforms and stronger economic growth sustainably reduce fiscal imbalances and the stock of net government debt beyond the current expectations.
‘In our view, the (Omani) authorities have outlined a solid path to reduce the historically high fiscal deficits, backed by strong political will to implement the related reform measures,’ it said.
Reform momentum, S&P noted, has picked up under His Majesty Sultan Haitham bin Tarik, with several changes to governance, economic and fiscal policies.
As a result of these reforms, S&P expects a material reduction in Oman’s fiscal deficit to 4.2 per cent of GDP in 2021, from 15.3 per cent of GDP in 2020.
‘In its Medium-Term Fiscal Plan for 2021-2025, Oman has set out an ambitious target to achieve fiscal balance by 2025.
‘If the government fully implements its reform programme and oil prices turn more favourable than we had assumed, the pace of increase in net debt could slow significantly below our current forecast of slightly above five per cent of GDP on average over 2021-2024,’ S&P said.
‘We would expect countries in the GCC region to provide timely support to Oman if needed – for example, in the unexpected event of a significant deterioration in the external reserves that support the peg of the Omani rial to the US dollar,’ S&P added.