Muscat: Oman’s government on Monday signed a $1 billion loan agreement with 11 international banks, including two regional banks, to partly fund an OMR3.3 billion deficit in the state budget.
This is part of a major plan of the Ministry of Finance to meet the state budget’s deficit through a medium-term financial plan.
Of the total estimated deficit of OMR3.3 billion for 2016, OMR600 million will come from net grants, OMR900 million from foreign borrowing, OMR300 million from domestic borrowing, and OMR1.5 billion from general reserves.
Darwish bin Ismail Al Balushi, minister responsible for financial affairs, said the participation of such a large number of banks reflected the trust of global banking institutions in the strength and resilience of Oman’s economy and its positive outlook.
“It is better to borrow from overseas markets than depend on domestic market for funds since it will not affect local liquidity. It will bring more international currencies, which can be used in the future,” said Mustafa Ahmed Salman, chairman and chief executive officer of United Securities. “We suggest the government borrow from the overseas markets faster, without any delay in taking advantage of interest rates. Libor rate is still cheaper. Also, there is a demand in the market to provide loans to Oman,” added Salman.
The loan facility was oversubscribed to the extent of $1.28 billion. Salman also noted that interest for overseas loans could be around 3 per cent, which is cheaper than the recent sovereign sukuk (Islamic bond) rate of 3.5 per cent.
Also, Oman’s debt-to-gross domestic product (GDP) ratio (a common parameter used for measuring the indebtedness of a country) is around 4 per cent, which is quite low when compared to most economies in the world, Anil Kumar N., senior vice-president, Asset Management, the Financial Corporation (FinCorp) earlier told ‘Times of Oman’.
The country is in a comfortable position to raise funds from overseas markets. The government will be in a better position to borrow funds from wherever it is cheaper and available
The agreement was signed on behalf of the Sultanate’s government by Darwish bin Ismail Al Balushi, minister responsible for financial affairs. - With inputs from Oman News Agency