MOODY’S UPGRADE REFLECTS OMAN’S SOUND FISCAL POLICY

Oman’s financial status has been upgraded to ‘Ba2’, maintaining a positive outlook

Moody’s credit rating agency on Monday issued its credit rating report for the Sultanate of Oman, in which it raised the country’s financial status from ‘Ba3’ to ‘Ba2’, while still maintaining a positive outlook on Oman.

The step comes as a result of the decline in Oman’s indebtedness, as well as the improvement in Oman’s ability to meet its financial obligations during the year 2022.

The agency attributes this improvement both to the increase in public revenues and the tangible efforts made by the government of Oman in controlling financial conditions.

The progress also reflects the soundness of the government’s decision to channel financial surpluses into public debt reduction tracks. It referred to sustained improvement in the effectiveness of fiscal policy and the efficiency of financial governance. In its report, Moody’s stated that government efforts had a tangible impact on maximising fiscal surpluses.

It noted that Oman’s measures led to a 15 percent decline in total public debt during 2022. It quoted a trend that brought the debts down from 68 percent in 2020 to 40 percent in 2022 as a ratio of gross domestic product (GDP).

The international agency pointed out that the positive future outlook promises sustained amelioration in the public debt reduction rate over the next few years, despite the decline in oil prices, provided that the level of spending is kept under control and that more developed financial measures are endorsed.

In a word of praise, the agency pointed out that, despite having achieved additional financial revenues in 2022, the government of Oman maintained a controlled level of spending.

Moody’s noted that it had made an assessment about the shift in the government’s approach to manage fiscal policy during the period of high oil prices. In this context, the agency stressed the effectiveness of Oman’s fiscal policy. It stressed that this management improved in an unprecedented manner and that it will enhance the credit position of the

Sultanate of Oman in the medium term and the long term.

The agency said that the Medium-Term Fiscal Plan and initiatives undertaken by Oman to enhance non-oil revenues contributed to this improvement. From this perspective , the agency commended the removal of expenses associated with the oil sector from the state’s general budget. This measure, it said, would contribute to reducing financial risks that result from fluctuations in oil prices.

The agency projects that oil prices will average between $80 and $85 per barrel during the years 2023 and 2024. It expects that the green hydrogen sector will contribute to cutting down the risks associated with long-term credit rating, due a global trend towards achieving carbon neutrality.

Moody’s affirmed that there is an increasing confidence that 2022 improvement in financial indicators will prevail in the medium term. This, it noted, would contribute to raising credit rating.

Moody’s stressed that Oman’s credit rating is not likely to decline in the near future.

The international agency confirmed that this confidence comes from the government’s continuation of fiscal control measures that led to financial balance and consolidated the country’s ability to address future oil market fluctuations.