Moody’s expects the government to introduce and start implementing a medium-term adjustment programme/Bloomberg
by Kudakwashe MuzoriwaOman, the most vulnerable Gulf country in the oil-price war, plans to raise more than $1 billion in loans in the first half to bridge its budget deficit.
The sultanate, which is rated junk by the three major rating companies, is in talks with local and international banks about the borrowing. If oil prices remain low the government will focus on asset sales and reserves to fill a widening gap.
According to the International Monetary Fund, Oman is still addressing the impact of the last oil price crash in 2014 and is set to post its seventh straight budget deficit.
The largest Arab crude producer outside OPEC calculated its 2020 budget with a deficit of OMR 2.5 billion ($6.5 billion) based on an average oil price of $58 per barrel, way above oil’s current level of about $35 a barrel.
Moody’s recently downgraded Oman’s long-term issuer and senior unsecured ratings to Ba2 from Ba1 and changed the outlook to stable.
Oman’s debt is projected to continue increasing in the next two years, despite Moody's expectation that the government will begin implementing a significant medium-term fiscal adjustment programme to slow in the next few months and curb the increase in the debt burden.
Despite the implementation of some measures aimed at reducing spending and raising revenue, Moody’s said that over the next few years Oman’s debt and debt affordability metrics will continue to weaken.
Oman’s 2020 budget law that was approved by the late Sultan Qaboos bin Said in January 2020 contains no significant new measures that would durably reverse the fiscal deterioration in an environment of moderate oil prices.
However, Moody’s expects the government to introduce and start implementing a medium-term adjustment programme.
The Sultanate’s fiscal adjustment programme was foreshadowed by the formation of the National programme for Fiscal Balance (Tawazun) in September 2019, while the 2020 budget statement confirmed the development of a multi-year budget framework for 2020-24 that would be supported by a range of public finance management reforms.
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