MUSCAT: Fitch Ratings downgraded Oman for the second time this year because of what it called the “continued erosion” of the country’s fiscal and external balance sheets. The rating was lowered to `BB-’ and the outlook is negative.
Oman is on track to run a budget shortfall that Fitch estimates at nearly 20 per cent of GDP 2020, compared to about 8 per cent in 2019. “We expect fiscal reform and higher oil prices to narrow the fiscal deficit to the mid-single digits by 2022, but there are considerable downside risks to this forecast,” Fitch analysts said in a report.
Oman’s financial straits are a major challenge for Sultan Haitham bin Tariq Al Said, who took power in January. Fitch said it sees “a real prospect for implementation of substantial fiscal reform” under the new ruler. “The coming three years will be a critical test of the funding flexibility that Oman has displayed in the past and a steep maturity schedule will keep Oman’s funding needs large beyond that, even as the fiscal deficit is reined in,” Fitch said.
Although assistance from Oman’s Gulf neighbours remains an option, Fitch expects any GCC aid programme will be calibrated to facilitate but not meaningfully replace debt market funding. “The size, timing and form of further support remain uncertain amid Oman’s desire to maintain geopolitical neutrality, political and fiscal challenges in the rest of the GCC and the large size of Oman’s funding needs,” Fitch said.