Muscat – S&P Global Ratings upgraded its long-term foreign and local currency sovereign credit ratings on Oman to ‘BBB-‘ from ‘BB+’ with a stable outlook on Friday. This reflects the continued strengthening of Oman government’s public finances and marks a significant development in its economic history with the sultanate regaining its investment grade rating after a gap of seven years.

In its rating action commentary, S&P said it could further raise Oman’s ratings over the next two years if reforms lead to steady growth in the sultanate’s GDP per capita, supported by continued momentum in non-oil growth. Measures to strengthen institutions that support economic diversification and development of domestic capital markets could positively impact the ratings, the agency added.

‘The upgrade reflects the ongoing strengthening of the Omani government’s public finances and the external deleveraging of many state-owned enterprises. Following significant deterioration in the balance sheet from 2015 to 2021, the government has implemented structural reforms that will allow it to return to a net asset position starting this year,’ S&P stated.

The stable outlook on Oman’s sovereign ratings balances the potential benefits of the government’s fiscal and economic reform programme against the economy’s structural susceptibility to adverse oil price shocks.

S&P also observed that the sultanate has reorganised its government-related entities (GREs) sector to enhance operational efficiencies and improve financial positions. This supported a decline in total GRE debt to US$33.8bn (30% of GDP) in June 2024, compared to a peak of US$35.9bn (41% of GDP) at the end of 2021.

‘We assume the government will continue gradually reducing its footprint in the economy – moving from owner to regulator – via asset sales to help develop the non-hydrocarbon private sector and attract foreign direct investment,’ the agency said.

S&P expects the momentum of the government’s fiscal and economic reforms to continue from 2024 to 2027. It forecasts the government will post fiscal surpluses of 1.9% of GDP during this period, assuming Brent oil prices to remain around US$80 per barrel from 2025 to 2027. In its view, this places the government in a position to continue reducing external debt levels and accumulating liquid assets.

Oman’s credit ratings were severely affected in 2020 and 2021 due to the twin shocks of declining oil prices and outbreak of the COVID-19 pandemic.

Commenting on Oman’s ratings upgrade, H E Dr Nasser bin Rashid al Mawali, Undersecretary of Ministry of Economy, said these significant improvements in Oman’s sovereign ratings reflect the progress in the country’s efforts to ensure financial stability. Regaining investment grade rating represents one of the most important milestones achieved through implementation of Oman Vision 2040.

“S&P’s decision to raise Oman’s rating from BB+ to BBB- is an important achievement that positions the sultanate among countries classified as attractive for investment based on their creditworthiness,” H E Mawali said.