Moody’s Investors Service has raised Oman’s ratings and maintained a positive outlook due to the country’s improved fiscal surplus and responsible spending practices. The government’s issuer and long-term senior unsecured ratings were upgraded from Ba3 to Ba2, while the senior unsecured medium-term note program rating was raised from (P)Ba3 to (P)Ba2.
According to Moody’s, the upgrade is a result of Oman’s reduced debt burden and improved debt affordability metrics in 2022, primarily driven by substantial oil and gas revenue windfalls. This has enhanced the country’s ability to withstand potential future shocks. The fiscal metrics were bolstered by the government’s prudent spending approach and the use of surplus funds and accumulated fiscal reserves to repay debt. Moody’s views this as evidence of an increasingly effective fiscal policy and strong governance.
The positive outlook reflects the potential for Oman’s enhanced debt metrics to be maintained in the coming years, even in the face of lower oil prices. This will be achieved through the continuation of disciplined spending practices and the implementation of further fiscal and structural reforms.
Furthermore, the rating upgrade extends to Oman Sovereign Sukuk S.A.O.C, a special-purpose vehicle based in Oman and backed by the government. The entity’s senior unsecured ratings and medium-term note program rating were raised to Ba2 and (P)Ba2 from Ba3 and (P)Ba3, respectively.
Oman’s local currency (LC) and foreign currency (FC) country ceilings have also been increased in line with the sovereign issuer rating upgrade. The LC country ceiling, set at Baa3 and two notches above the sovereign issuer rating, takes into account the economy’s heavy reliance on a single revenue source, the government’s significant economic influence, and Oman’s historical pattern of significant external imbalances. These factors are partly offset by predictable institutions and moderate political risk.
The FC country ceiling, rated at Ba1 and one notch below the LC ceiling, reflects relatively low risks associated with transfers and convertibility, supported by the sovereign’s strong foreign currency reserves. Oman’s track record of improving fiscal policy effectiveness is also taken into account, while considering the country’s high but declining level of external debt.
