Muscat – S&P Global Ratings has upgraded its outlook on Oman to ‘positive’ from ‘stable’, mainly due to the government’s improving fiscal performance. At the same time, S&P has affirmed Oman’s sovereign credit ratings at ‘BB/B’.
‘The positive outlook reflects our view that the government’s fiscal and economic reform programme could strengthen Oman’s fiscal position beyond our current assumptions, adding a greater degree of resilience against the economy’s structural susceptibility to adverse oil price shocks,’ S&P stated on Friday.
Last year, S&P upgraded Oman’s sovereign credit ratings twice on improving fiscal position due to government reforms and higher oil prices.
S&P on Friday indicated that it could further raise the ratings on Oman over the next 12 months if ongoing reforms further strengthen the sultanate’s fiscal position, due to a continued reduction in government net debt and interest costs.
‘A stronger economic growth trajectory could also contribute to an upgrade,’ the rating agency added.
Oman’s government returned to a fiscal surplus last year with a preliminary estimate of 5.3 per cent of GDP in 2022 after seven years of deficits. S&P forecasts general government fiscal surpluses in 2023 and 2024, following a RO1.15bn surplus in 2022.
‘We expect fiscal surpluses will continue in 2023 and 2024. Government reform efforts and favourable oil prices will support fiscal surpluses over next two years,’ the rating agency said.
According to S&P, Oman’s fiscal and external positions are benefiting from government reforms and higher oil prices. The sultanate’s government used windfall oil revenue over 2022 to reduce debt to RO17.6bn (40 per cent of GDP) from RO20.8bn (61 per cent of GDP) at year-end 2021.
‘We understand that the government repaid RO511mn in debt in January 2023 and made additional repayments in March 2023. We estimate year-end 2023 government debt at RO16.5bn (37 per cent of GDP). The reduced debt stock, along with forecast fiscal surpluses in 2023 and 2024, will increase fiscal policy space,’ S&P noted.