Muscat – Global ratings agency Moody’s Investor Service on Friday upgraded Oman’s sovereign credit rating for the second time this year based on the sultanate’s lower debt burden amid supportive oil prices and spending restraint.
Moody’s upgraded the Government of Oman’s long-term issuer and long-term senior unsecured ratings to Ba1 from Ba2 and changed the outlook to stable from positive. Moody’s also upgraded Oman’s senior unsecured medium-term note programme rating to (P) Ba1 from (P) Ba2.
‘The rating upgrade reflects Moody’s expectation that the improvements in Oman’s debt burden and debt affordability metrics during 2023 will last, as the government’s actions amplify the oil prices windfall gains through spending restraint and prioritisation of debt repayment,’ the ratings agency said in a statement.
As in 2022, the Omani government continued to prioritise debt reduction. Moody’s estimates that during 2023, the nominal value of Oman’s outstanding government debt declined by at least 11% (equivalent to US$5bn of mostly external debt) after falling by 15% (or $8.2bn) in 2022.
Moody’s noted that a lower debt burden increases the sovereign’s resilience to potential future shocks, adding, ‘the improving track record of fiscal prudence and policy effectiveness increases the likelihood that the stronger debt burden and debt affordability metrics will be maintained in the next few years even if oil prices become less supportive.’
Moody’s said the ‘stable’ outlook on Oman’s rating captures the balance of risks at the Ba1 rating level. It cautioned that Oman’s still heavy economic and fiscal reliance on the hydrocarbon sector exposes the sovereign to a potentially large and protracted deterioration in its fiscal and external accounts in case of a decline in global oil demand and prices.
‘Upside risks are related to the government’s improved reform momentum since 2020 and its efforts to increase economic and fiscal diversification, which support the prospect that, over time, Oman’s reliance on hydrocarbons will decline,’ the ratings agency stated.