‘Baa1’ for Oman’s USD bond issuance

Manama: Moody’s Investors Service yesterday assigned a definitive Baa1 rating to the Government of Oman’s US dollar bond issuance.

The issuance consists of two tranches -- $1.0 billion due in 2021, and $1.5bn due in 2026 -- marking the first international bond issuance by the Government of Oman since 1997.

Moody’s definitive rating for these debt obligations follows the provisional rating assigned on June 3.

Oman’s Baa1 long-term government bond and issuer rating with stable outlook is supported by high levels of wealth, fiscal space offered by relatively low levels of general government debt and still sizable government financial assets. 

Although Moody’s expects government debt to rise to 33 per cent of GDP by 2017 from less than 5pc at the onset of the oil price shock in 2014, Oman’s fiscal buffers, which the rating agency estimates at around 85pc of GDP in 2015, will provide support through the process of fiscal and external adjustment.

Having said that, Oman’s heavy economic and fiscal reliance on the oil and gas sector represents a key credit challenge. Oman suffered a steeper fiscal deterioration than most Gulf Cooperation Council (GCC) peers as a result of the oil price shock. 

Hydrocarbon exports accounted for an average 67pc of total goods exports in 2010-15, while oil and gas revenues constituted 87pc of total government revenues over the same period.

Despite material fiscal adjustment underway, the IMF estimates that Oman’s fiscal and external break-even oil prices remain one of the highest among GCC countries.

Upward pressure on the rating would stem from faster-than-currently expected progress on containing government fiscal deficits and debt and diversifying the economy and government finances away from oil.

Downward rating pressure would emerge if government finances deteriorate faster than Moody’s baseline scenario currently anticipates. Greater-than-expected weakening in the balance of payments would also be credit-negative.

This credit rating and any associated review or outlook has been assigned on an anticipated/subsequent basis.