Muscat: Interest on loans or debt servicing costs for the Omani government is expected to shoot up by 194 per cent this year, mainly due to higher borrowings and an increase in the rate of interest.
The budget proposal projected OMR265 million to be set aside to pay interest on loans this year, against OMR90 million for the budget proposal in 2016.
“The rate is going up and the ratings of the Oman government are declining, which have an impact on the rate of interest,” said Ashok Hariharan, Partner and Head of Tax for KPMG in the Lower Gulf.
In fact, last year the government relied on external borrowings for a major proportion of its debt needs, which allowed the private sector to depend on the domestic market for their funding needs.
In order to plug the deficit, the Omani government issued $4 billion worth of international bonds last year, $5 billion in syndicated loans, $500 million in Islamic bonds and $2 billion from export credit agencies. Further, debt issues accounted for 72 per cent of the total deficit, while the remaining 28 per cent was covered by drawing on reserves.