Mubasher: Moody's Investors Service on Tuesday assigned a definitive Baa1 rating to the Omani government's dollar-denominated bond issuance.
The two-tranche issuance is the first international bond issuance by the Government of Oman since 1997, the report said, noting that the issuance includes $1.0 billion due in 2021, and $1.5 billion due in 2026.
"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, and comparatively low risk that contingent liabilities from the banking system or wider non-financial public sector will crystallize on the government's balance sheet as growth slows," the report stated.
Although Moody's expects Oman's government debt to rise to 33% of GDP by 2017 from less than 5% at the onset of the oil price shock in 2014, the Sultanate's fiscal buffers (which the ratings agency estimates at around 85% of GDP in 2015) will provide support through the process of fiscal and external adjustment, Moody's noted.
"Having said that, Oman's heavy economic and fiscal reliance on the oil, and gas sector represents a key credit challenge," the report said.
The Gulf country suffered a steeper fiscal deterioration than most of its GCC counterparts due to the oil price shock. Hydrocarbon exports accounted for an average 67% of total goods exported between 2010 and 2015, while oil and gas revenues constituted 87% of total government revenues over the same period.
Although material fiscal adjustment is underway, the International Monetary Fund (IMF) estimates that Oman's fiscal and external break-even oil prices remain one of the highest among GCC countries.
"Moody's definitive rating for these debt obligations follows the provisional rating assigned on 3 June 2016," according to the report.
