Oman junked by S&P, outlook negative

S&P Global Ratings on Friday lowered its long-term rating on Oman to BB+ from BBB- with a “negative” outlook, indicating the agency could further reduce its rating.

The move to cut Oman’s credit rating below investment-grade status “reflects our view that the Omani government’s heightened external financing needs have resulted in the economy’s large net external asset position, (external assets exceeding external liabilities) declining to a level insufficient to mitigate the risk from its volatile export revenue base.”

The rating agency estimated that Oman’s net external asset position has fallen to 30 per cent of its current account, from 60 per cent a year ago.

It also projected a large current account deficit of more than 10 per cent of GDP this year and next, due to subdued oil prices and the sultanate’s dependence on revenue from hydrocarbon sector exports. The government is financing these current account deficits by borrowing on international markets.

Indeed, Oman has had about $5bn in bond issuance this year. The oil minister has said the sultanate is considering privatising parts of its state-owned energy infrastructure as it looks to diversify the economy and raise money amid the protracted oil-price slump.