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Moody's Investors Service has upgraded Oman's ratings and maintained the positive outlook on the improvement in the country's fiscal surplus as well as its spending restraint.
It upgraded the Government of Oman's issuer and long-term senior unsecured ratings to Ba2 from Ba3 and upgraded the government's senior unsecured medium-term note program rating to (P)Ba2 from (P)Ba3.
"The upgrade reflects the improvements in Oman's debt burden and debt affordability metrics during 2022, mainly as a result of the large oil and gas revenue windfall, which increase the sovereign's resilience to potential future shocks," Moody's said in a report on Monday.
Importantly, the strengthening of the fiscal metrics was supported by the government's spending restraint and its decision to use the fiscal surplus and previously accumulated fiscal buffers to pay down debt, which in Moody's view demonstrates an improving track record of fiscal policy effectiveness and governance strength.
The positive outlook captures the prospect that the improvements in the government's debt metrics will be sustained over the next few years, despite lower oil prices, through maintenance of spending discipline and further implementation of fiscal and structural reforms.
The rating action also applies to Oman Sovereign Sukuk S.A.O.C, a special-purpose vehicle domiciled in Oman, backed by the government. The entity's backed senior unsecured ratings and its backed senior unsecured medium-term note program rating were upgraded toBa2 and (P)Ba2 from Ba3 and (P)Ba3, respectively.
Oman's local currency (LC) and foreign currency (FC) country ceilings were raised by one notch in lockstep with the sovereign issuer rating upgrade. The LC country ceiling atBaa3, two notches above the sovereign issuer rating, incorporates the economy's heavy reliance on a single revenue source, the government's large economic footprint, and Oman's track record of high external imbalances, partly mitigated by predictable institutions and moderate political risk.
The FC country ceiling atBa1, one notch below the LC ceiling, reflects relatively modest transfer and convertibility risks, supported by the sovereign's robust foreign-currency buffers and Oman's track record improving fiscal policy effectiveness, set against its high, albeit declining, level of external indebtedness.
(Writing by Brinda Darasha; editing by Mily Chakravarty)
