MUSCAT: International ratings agency Moody’s has raised Oman's credit rating for the second time in a row from Ba1, up from Ba1, and revise the outlook to ‘stable’, from ‘positive’.
Moody’s attributed this upgrade to expectations of a continued decline in public debt and improved indicators of the government’s ability to bear the burden of the state’s public debt, as a result of the efforts in harnessing additional revenues to pay off the public debt, keeping expenditure in check, and improving financial revenues.
The agency said that improving financial policies and their effectiveness, and the government’s determination to reduce the state’s public debt, will contribute to strengthening the state’s financial position and the government’s flexibility and ability to confront possible future shocks, even if oil prices witness a decline in their levels.
Moody’s explained that the continuation of the corrective measures taken since 2020 and the government’s efforts made towards enhancing economic and financial diversification support the Sultanate of Oman’s trend towards reducing dependence on oil revenues. It expects average oil prices to reach about $80-85 per barrel during the period 2024-2025 before declining.
Prices will gradually average between $55 and $75 per barrel over the medium term. Based on these estimates, the agency expects the state’s public debt to decline to about 35 per cent as a percentage of GDP during the next three years.
The agency also expects that the current account will continue to achieve a surplus during the next two years, 2024 and 2025. Furthermore, the state’s general budget will continue to achieve a financial surplus of about 3.5 per cent of the gross domestic product during the current year after achieving a financial surplus of about 7.5 per cent of the gross domestic product during the year 2022.
Moody’s also expects the current account to continue to achieve a financial surplus of about 2 per cent during the year 2023, after recording a surplus of about 5 percent in 2022. Green hydrogen projects are likely to contribute to reducing credit risks arising from the carbon transition.
It pointed out that the credit rating may rise if the state’s public debt continues to decline and the non-oil revenue sector improves. --(ONA)
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