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Fitch Scores upgraded Oman’s long-term overseas foreign money issuer default score on August 15, from BB-to BB, with a steady outlook.
It’s a additional signal of how Center East oil producers are benefiting from the spike in oil costs this 12 months, pushed by Russia’s invasion of Ukraine in February. Helped by the identical developments, the Saudi economic system is ready to broaden to greater than a trillion {dollars} in worth this 12 months.
Oman is a much smaller economic system, however Fitch pointed to “vital enhancements” within the sultanate’s fiscal metrics this 12 months, with increased oil revenues underpinning price range surpluses and prompting a pointy fall within the ratio of presidency debt to GDP.
The scores company is forecasting a price range surplus of 5.5% of GDP in 2022 and three.4% in 2023 – after eight straight years of deficits. The pattern throughout this 12 months and subsequent 12 months comes regardless of Fitch pencilling in a decline in common oil costs from $105 a barrel this 12 months to $85 subsequent 12 months.
Oman’s scenario can be helped by a gradual ramping up of its crude oil and condensate output to an anticipated excessive of 1.1 million barrels a day over the interval.
The Omani authorities has been utilizing its oil and gasoline windfall to repay a few of the nation’s money owed. Within the first seven months of this 12 months, it lower the general public debt burden by RO2.2 billion ($5.7 billion). It now stands at round $48.3 billion.
The economic system has additionally been drawing in some funding from richer neighbors, with Saudi Arabia’s Public Funding Fund not too long ago making a $299 million dedication.
The federal government has additionally been utilizing a few of its extra revenue to melt the affect on its residents of excessive gasoline costs and inflation extra typically. Fitch mentioned spending is anticipated to be increased than budgeted in 2022 on account of gasoline and different subsidies for locals. It additionally famous that the timeframe for phasing out electrical energy subsidies has been prolonged from 5 to 10 years.
Nevertheless, there are nonetheless loads of challenges forward for the federal government, and policy-makers in Muscat will likely be conscious that oil costs have a tendency to not stay excessive for prolonged intervals. Fitch mentioned Oman’s funding place was now significantly extra snug in comparison with current years, however added that its “medium-term funding necessities stay sizeable and Oman’s stage of exterior indebtedness is excessive”.
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