Fitch upgrades Oman’s credit rating to BB+, with stable outlook

New York: Fitch on Monday issued its credit rating report on the Sultanate of Oman, upgrading the country’s rating to “BB+”, with a stable outlook.

The positive development in the classification reflects the tangible efforts made by the government in maintaining control over public spending, utilising additional oil revenues to cut down the state’s public debt and manage the country’s lending portfolio.

Fitch pointed out that a key factor in the upgrade was the Omani government’s sustained enforcement of measures to keep fiscal conditions under control, in response to the decline of the oil price’s $80-90 break-even point (per barrel)—during the period from 2017 to 2019—to less than $70 per barrel in 2023.

This significantly contributed to decreasing vulnerability to oil price fluctuations despite continued risks from oil markets, according to the international agency.

Fitch commended the government's commitment to its measures despite the rise in oil prices. Current spending is set to grow in line with gross domestic product (GDP). Fitch expects GDP to grow from 2.1 percent in 2023 to 2.7 percent in 2024.

Fitch also expects that non-oil sector to grow by about 2.7 percent during 2023. It also observed that the construction sector begins to recover after Covid-19.

The agency said that investments in the sector of renewable energy and hydrogen is expected to spur growth with effect from 2025.

Fitch also projected that the state’s general budget will achieve financial surplus of about 4.1 percent in 2023, 2.4 percent in 2024, and 1 percent in 2025.

In its report, the agency indicated that it expects public debt, as a ratio to GDP, to decline to about 36 percent during 2023, and to stabilize at 35 percent during 2024 and 2025, compared to previous forecasts that public debt would reach about 45 percent in 2023.

Fitch also lauded the Omani government’s trend in managing public debt and repaying some foreign loans prior to their maturity, taking advantage of additional revenues. This the agency said, led to reducing the risks of external financial liquidity pressures.

The agency expected that the rate of net foreign assets to revert back to its original positive standing, and that foreign cash reserves would grow at a moderate mode during the remainder of 2023.

It added that the credit rating of the Sultanate of Oman may rise if external public debt, as a ratio to GDP, continues to decline and that net sovereign foreign assets continue to improve.