Oman

Oman returned to the debt market for the third time in less than three months, taking advantage of investors’ appetite for yield to help plug the Gulf Arab region’s widest budget deficit, Bloomberg News reported. The largest oil exporter outside of OPEC sold $3.25 billion in a three-part debt offering. Oman priced $1.75 billion in 10-year notes at a yield of 6.25%. It sold another $1 billion in 30-year securities at 7.25%, versus guidance of 7.5% and initial price talk of between 7.625% and 7.75%.

The implementation of a 5% value-added tax in Oman this year is seen bringing in 300 million rials ($779 million), the Oman News Agency reported Saturday, citing the Gulf nation’s finance minister, Bloomberg News reported. Oman’s 2021 budget, announced Friday, forecasts a 14% drop in spending and a 19% decline in revenue after finances were ravaged by lower crude prices and the coronavirus pandemic. The country last year announced it would impose a 5% VAT in an effort to bolster the economy and curb its widening budget deficit.

Oman and Bahrain are stuck on the sidelines of the international debt markets after a record borrowing tally by Gulf Arab economies this month underscored a divide between the region’s strongest and weakest sovereigns, Bloomberg News reported. Facing external financing needs that Goldman Sachs Group Inc. estimates at $5.5 billion this year, Oman and Bahrain are all but shut out from bond funding, waiting for their yields to retreat before wading into the market.

Oman’s ministry of finance has cut by 5% the budget allocated to government agencies for 2020, according to two sources and a government circular seen by Reuters. The decision was “in response to the financial challenges of the country,” a source at the ministry of finance said. Oman, a small Gulf oil producer rated ‘junk’ by all major rating agencies, is expected to see its deficit widen this year because of lower oil prices, Reuters reported.

Oman is in talks with banks to raise around $2 billion in loans, sources familiar with the matter said, as part of plans to manage an estimated $6.5 billion fiscal deficit that may widen due to plunging oil prices, Reuters reported. Oman, one of the weakest economies in the oil-rich Gulf region, has piled up debt in recent years to offset the impact of falling crude revenues. Its debt to GDP rate soared to nearly 60% last year from around 15% in 2015, and according to S&P Global Ratings it could reach 70% by 2022.

Moody’s downgraded Oman’s credit rating deeper into junk territory on Thursday citing the Arab country’s lower fiscal strength, evident in its higher government debt and weaker debt affordability metrics than the ratings agency expected. Moody's cut Oman's rating here to 'Ba2' from 'Ba1' and changed the outlook to stable, Reuters reported. On Feb. 23, Oman’s Sultan Haitham bin Tariq al-Said said the government would work to reduce public debt and restructure public institutions and companies to bolster the economy.

Oman’s Sultan Haitham bin Tariq al-Said said on Sunday the government would work to reduce public debt and restructure public institutions and companies to bolster the economy, Reuters reported. Haitham, in his second public speech since assuming power in January, said the government would create a national framework to tackle unemployment while addressing strained public finances. “We will direct our financial resources in the best way that will guarantee reducing debt and increasing revenues,” he said in the televised speech.

Oman’s Ministry of Commerce and Industry (MoCI) said that the Sultanate’s bankruptcy and insolvency law will come into effect from July 2020 and it will help companies to get out of the financial turmoil after paying debts and reconciling with creditors as per a restructuring plan, Islamic Business and Finance reported.

Oman’s bond investors gained some respite this week as Fitch affirmed its rating for the indebted country and the government published encouraging deficit figures, potentially paving the way for the Gulf oil producer’s next debt sale, Reuters reported. Rated junk by all three major rating agencies, Oman has relied heavily on borrowing over the past few years to spur growth and refill its coffers – depleted because of lower oil prices.