Oman's $5B bond sale 'a global vote of confidence': Finance Minister

Published March 6th, 2017 - 04:59 GMT
This was the first time that Oman had issued a 30 year maturity period bond, which accounted for $2 billion of the funds raised. (File photo)
This was the first time that Oman had issued a 30 year maturity period bond, which accounted for $2 billion of the funds raised. (File photo)

A global vote of confidence in Oman’s future has been given by international investors who ploughed billions of dollars into the future of the Sultanate.

The success of a bonds issue means international investors have trust in Oman and its financial system, a senior official from the Ministry of Finance said. 

“Oman has entered the international market to cover (the country’s) 2017 budget deficit. The response from international investors was around $20 billion. But the government has taken only $5 billion. This shows that the international investors have a good trust in Oman and its financial system,” Mohammed Jawad bin Hassan bin Suleiman, advisor at the Ministry of Finance, told Times of Oman.

Last Wednesday, Oman raised $5 billion from an international bond sale.

Economists said that completing the entire foreign borrowing plan for 2017 in a single issue, by selling $5 billion of international bonds, reveals global investors’ confidence in Oman and its ability to overcome the current economic downturn.

“There is confidence among investors about Oman’s economy for both long and short term,” Fabio Scacciavillani, Chief Economist at the Oman Investment Fund, said.

Oman’s bond sale last Wednesday, in tranches of five, 10 and 30 years, was about double the size that most investors had expected and a huge amount for a country which returned to the international bond market in 2016 after an absence of two decades.

Order books for the issue totalled $20 billion, bankers said, adding that the country can now count on strong international demand.

Loai Bataineh, CEO of Ubhar Capital, said it’s a very positive move.

“Global investors abroad buying the unprecedented 30-year bond, clearly shows that they trust the Omani economy with their money for long periods,” Loai added.

This was the first time that Oman had issued a 30 year maturity period bond, which accounted for $2 billion of the funds raised.

The five and 10 year tranche raised $2 billion and $1 billion respectively. Most long term bonds were reportedly taken up by investors in the United States while the five year tranche was more in demand with Gulf based investors.

Mubeen Khan, an Analyst and Chairman of Muscat Chapter of The Institute of Chartered Accountants of India, said that the bond sale demonstrates the confidence that international investors have in Oman’s economy.

"The current international bond issuance underlines a strategic success because Oman is able to sell long term 10 years and 30 years maturity bonds that give ample leg room for the repayment,” Mubeen said.

Dr Anchan C K, International Investment and Economic Advisor in Oman, said this shows that global investors are confident of Oman overcoming the current deficit caused by the global oil price dip.

“If a global investor is buying Oman bonds, that too for a long term, then it says that they are positive about the country’s economy,” he added.

“Many investors - notably in Asia, but also in the US and Europe, where interest rates are low - have been willing to increase their exposure to Gulf Cooperation Council (GCC) country sovereigns and banks, due to the high credit ratings and good yields,” Anchan added.

According to Moody’s ratings agency, containing government fiscal deficits and debt, together with faster-than-currently expected progress in diversifying the economy and government finances away from oil could lead to an upgrade in rating. Oman is currently rated Baaa1.

At the beginning of this year, Oman said it planned to cover a projected OMR3 billion budget deficit in 2017 with OMR2.1 billion of international borrowing, OMR400 million of domestic borrowing and the drawdown of OMR500 million from financial reserves.

This week's bond sale covered over 90 per cent of the international borrowing plan. The early issuance may save money for Oman since US interest rate hikes are set to resume as soon as this month, and given the risk that credit rating agencies could lower Oman's rating or outlook later this year.

By Khadija Alzadjali


© Muscat Media Group

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