Recent issues with Oman’s bond rating on the financial markets are short term, with strong signs that the worst is over.
Despite downgrades, leading credit rating agencies have recognised that the situation in Oman is not as bad as was seen in Bahrain recently, where bond credit ratings remain weak.
Fortunately, Oman has a solid basis for further improvement. Unlike Bahrain, it will not require any bailout; it also has no major debt repayments due in the near future and holds sufficient liquidity to see itself through a short period of what the ratings agencies are calling “a period of impaired market access”.
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This period is likely to last up to 18 months, but the country’s foreign exchange reserves sovereign wealth fund assets should be more than enough to weather that time.
At the same time, the country is not standing still; it is taking active steps to strengthen its position.
It is planning to cut borrowing for the year by up to 70 percent and bridge any shortfall in budget through assets sales. It now seems likely that Oman will retain access to international money markets.
Once Oman can reassure investors of its commitment to these reforms, which are designed to get the budget deficit back on an even keel, it should be in a position to issue Eurobonds in the foreseeable future.