• Home
• News Article

Aug 27 2012

more articles from

Moody�s Affirms Oman�s Healthy Public Finances Despite Oil Price Exposure

Oman is enjoying a sustained period of strong public finances despite the economy�s over-reliance on hydrocarbons, according to Moody�s Investors Service. �Oman has a robust external payments position and public finances,� the ratings agency said in its recent Credit Analysis: Oman report. Moody�s noted that Oman�s A1 foreign and local currency government bond strength and stable outlook balances its considerable financial strength against long term structural economic challenges. But the agency points out that given that around 90% of government revenue is dependent on oil and gas, Oman�s economic risk is derived from its vulnerability to fluctuations in the oil market. Moody�s goes on to say that the effects of these fluctuations are buffered by the government�s ample fiscal space for countercyclical policies, which partly stem from the low level of debt. The agency adds that crude oil reserves amount only to 16.9 years of current production levels, while its gas reserves are more bountiful at 36 years of current production levels.

Moody�s notes that the government has raised spending recently (including a rise in the minimum wage for nationals) to address social welfare needs and concerns and estimates the fiscal breakeven oil price at $77/B, one of the highest in the GCC. It also projects that the budget is likely to remain in a sizeable surplus in 2012 and 2103, but cautions that public expenditures could be constrained if oil prices fell sharply and the breakeven oil price were to shoot up significantly. Moody�s expects real non-oil GDP growth to remain around 5% in 2012 and 2013, higher than growth in the oil sector.

Oman realized a budget surplus of OR1,606.4mn ($4,176.6mn) in the first half of the current year, with revenues at OR7,369.8mn ($19,161.5mn) and expenditure of OR5,763.4mn ($14,984.8mn), according to statistics from the ministry of finance released earlier this month. The budget oil price for Oman was set at $75/B.

© Copyright Zawya. All Rights Reserved.