Moody's Investors Service says Oman's A1 foreign and local currency government bond ratings and stable outlook balances its considerable financial strength against long-term structural economic challenges.
According to Moody's latest annual report on Oman, Credit Analysis: Oman, posted on its website, the Gulf state has a robust external payments position and public finances.
“But Oman also has much smaller oil and gas reserves than the other five GCC member states and it is heavily dependent on oil and gas, which account for around 90 per cent of government revenue. Oman's economic risk is therefore its vulnerability to fluctuations in oil prices.
“Nonetheless, the effects of large fluctuations in oil prices are buffered to a certain extent by the government's ample fiscal space for countercyclical policies, which in large part stems from its low debt level.”
Enhanced oil recovery (EOR) techniques have also extended the life of Oman's oil fields, but its crude oil reserves amount to only 16.9 years of current production levels, much shorter than the other major GCC oil exporters. Oman's natural gas reserves are, however, more bountiful, with reserves equal to 36 years of current production levels, ratings agency said.
“The government has ramped up spending recently to address social welfare needs and concerns, yet Oman's breakeven fiscal oil price has risen only slightly from its 2008 level. However, at an estimated US$77 per barrel, Oman's fiscal breakeven oil price is one of the highest in the GCC.”
According to Moody's, while the budget is likely to remain in a sizable surplus this year and next year, public expenditures would be constrained if oil prices fell sharply and the budgetary breakeven oil price were to rise significantly from its current level.