S&P Global Ratings, an American credit rating agency revised its outlook on Oman to Positive from Stable citing higher oil prices and fiscal reform plans that are expected to narrow state deficits and slow a rise in debt levels over the next three years.
Oman, a comparatively small oil producer, more sensitive to oil price changes than its hydrocarbon-rich Gulf neighbors, has been hit hard by the 2020’s price crash and the COVID-19 pandemic.
“The consequences of the sharp decline in oil prices in 2020 and the COVID-19 pandemic are lessening, relieving economic and fiscal strains on Oman,” S&P said in a statement.
The rating agency expects the fiscal deficit to fall to 4.2 percent of gross domestic product (GDP) this year from 15.3 percent of GDP in the last year. But lower oil prices predicted from 2023 would result in a worsening fiscal trajectory despite planned reforms, it said, adding that total funding needs, fiscal deficit plus maturing debt, would remain high, averaging about 12 percent of GDP through 2024.
Last year, Oman’s debt as a share of GDP reached about 80 percent, up from a little more than 5 percent in 2015. Last month, the International Monetary Fund (IMF) estimated that overall government debt would fall to 70 percent this year.
In the past year, the Sultanate has taken various steps to improve its finances, including the implementation of a value-added tax (VAT) and the decision to engage with the IMF to develop a debt strategy.
In October 2020, S&P downgraded Oman’s long-term sovereign credit rating to B+ from BB- due to the projected material deterioration of public sector finances.
