4 days ago
Oman's credit rating upgrade heralds numerous benefits
Recently, Moody's upgraded the Sultanate of Oman's rating from Ba1 to Baa3, while revising the outlook to stable. The ratings agency attributed the upgrade to the improvement in Oman's public debt indicators and the strength of its financial position, along with the efficiency of its financial management, which has enhanced its ability to withstand shocks, especially in light of the decline in average oil prices and production.
The issuer commentary cites financial policies and provisions, as well as the measures taken in many aspects related to the Omani economy, economic diversification policy, and private sector stimulation.
Most of us know that an uptick in a country's credit rating contributes to strengthening the stability of its domestic economy, reducing the cost of borrowing, and stimulating foreign investment, especially if the country is free of bureaucracy in its daily operations.
An improved rating also increases the ability to finance development and social projects, enhances the country's competitiveness, and contributes to improving the quality of life for citizens. Moody's commentary also points to Oman's government efforts, explaining that they have achieved positive results, particularly with regard to public spending. Government spending declined to 29% of GDP, compared to an average of more than 41% during the period from 2016 to 2020.
Debt also declined from 37.5% of GDP at the end of 2023 to 35.5% at the end of 2024 and is expected to continue declining in the coming years.
The Moody's report expects the Omani economy to witness further improvement in the coming years and accelerating growth in the non-oil sector and reduce the primary non-oil deficit.
Over the past few years, the government has taken numerous measures to diversify sources of income, which can enhance long-term financial stability by working to increase the contribution of non-oil revenues to the general budget, supporting plans to develop the green hydrogen sector and related industries and expanding liquefied natural gas (LNG) production by 2030.
Raising Oman's credit rating could have significant positive impacts on the economy, finances and society as a whole. In the coming years, Oman can reap many benefits from this, particularly in terms of improving its ability to attract foreign investment.
A good credit rating reflects the stability of the economy and its ability to meet its financial obligations, making Oman a more attractive destination for foreign investors who can contribute to the development of new sectors such as technology, tourism, industry and others.
A ratings upgrade can also reduce borrowing costs, enabling the government and companies to borrow at lower costs. Some analysts believe that a rating upgrade would enable the Omani government to issue international or local bonds at lower costs, helping finance important national projects without significantly impacting the general budget.
It would contribute to strengthening economic stability, improve the business environment and encourage economic expansion to implement development and social programmes by financing projects to improve education, healthcare and housing, which would positively impact citizens' standard of living.
Oman seeks to achieve sustainable economic diversification away from oil and gas. The country is working to accelerate transition to a more sustainable and competitive economy, facilitate negotiations with its international trading partners and enhance its image in global markets. It will also support public-private partnership projects, which will contribute to stimulating social growth.
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