Muscat – Capital Intelligence Ratings (CI) has affirmed Oman’s long-term foreign currency rating and long-term local currency rating at ‘BBB-’, while the sovereign’s short-term foreign currency rating and short-term local currency rating remain at ‘A3’. The outlook on all ratings is positive.

In a statement, CI said the ratings reflect Oman’s improving capacity to absorb external shocks, including growing resilience to oil price volatility, underpinned by rising foreign exchange reserves and accelerated reform implementation under Vision 2040.

“Recent measures continue to reduce the state’s footprint in the economy through debt reduction, restructuring, and partial divestment of state-owned enterprises. At the same time, new legislation has been enacted to deepen private sector participation in non-hydrocarbon industries, attract foreign direct investment, strengthen labour market resilience, and modernise the banking and financial sector,” CI noted.

The ratings also consider “the Omani authorities’ ongoing fiscal consolidation efforts, including initiatives to broaden the revenue base, and the active use of oil windfalls during 2022–24 to prepay, repay, and buy back costly external debt.” These measures have contributed to a reduction in central government debt ratios and an improved debt maturity structure, the agency noted.

CI highlighted that Oman’s ratings are supported by prudent economic policies, the relative soundness of the banking system, and the expectation of financial support from other GCC countries if required.

The agency acknowledged Oman’s accelerated implementation of Vision 2040 reforms, which, along with stronger institutional capacity, increases the likelihood of a gradual but material reduction in reliance on hydrocarbons.

“Since our last review, the Omani government has introduced personal income tax legislation, imposing a 5% rate on high earners, effective January 2028. Persistent reforms since 2021 are beginning to deliver tangible results, with non-hydrocarbon sectors contributing 72.4% of real GDP in Q1 2025, up from 72.0% in 2024 and 69.9% in 2020,” CI said.

Non-hydrocarbon revenues accounted for 33.2% of total government revenues in H1 2025, compared with 30.5% in H1 2024. FDI inflows reached RO5.2bn (12.1% of GDP) in Q1 2025, raising the total stock of FDI to 70.9% of GDP as of March 2025.

CI further noted that public finances remain robust, supported by sustained fiscal consolidation, with expenditure rationalization – including gradual reductions in social subsidies – partly offsetting the impact of lower hydrocarbon revenues.

Looking ahead, CI expects Oman’s government budget to post an average deficit of 0.8% of GDP over 2025–2027, given declining hydrocarbon prices.

“The government is set to continue fiscal adjustment, with the progressive implementation of a tax administration modernisation programme targeting a 50% reduction in the tax compliance gap over four years. The new income tax law is projected to raise non-hydrocarbon revenues by roughly 0.3% of non-hydrocarbon GDP annually. Additionally, the introduction of a 15% domestic top-up tax on multinational companies will further strengthen non-hydrocarbon revenue and improve the budget structure,” the agency said.

CI confirmed that its positive outlook signals a better-than-even chance of a ratings upgrade within the next 12 months. This is based on expectations that ongoing structural reforms will gradually reduce Oman’s vulnerability to oil price fluctuations, improve revenue mobilisation, and lower fiscal risks from SOEs.

“The ratings could be upgraded by more than one notch over the next 12–24 months if public finances improve more than anticipated, particularly through a significant reduction in hydrocarbon reliance and stronger non-oil revenue mobilisation,” the agency added.

Conversely, CI added, the ratings could be downgraded by one notch in the next 12–24 months if geopolitical risks rise or fiscal and external metrics deteriorate significantly, for example, due to a prolonged sharp decline in oil prices or policy slippage.