Oman is planning to pay off 512 million rials ($1.33 billion) of financing this month ahead of its due date as the sultanate benefits from higher oil prices and fiscal and governance reforms.

According to the state-run Oman News Agency, the sultanate is using prepayments, bond buybacks and local debt sales to replace high-cost funds and improve its maturity profile. The government expects to save 127 million rials ($330 million) from these moves, which will be spent on projects that will boost its credit ratings as well as investor confidence.

Last month, Oman completed a voluntary debt buyback transaction totaling $701 million across Eurobonds. According to official calculations, this will result in cumulative interest cost savings to maturity of $232 million.

The windfall from the current elevated oil prices is supporting such nimble debt management manoeuvres.

Omani crude oil prices have averaged about $95 per barrel (/bbl) so far this year, relative to $61/bbl over 2021, according to S&P Global Ratings.

Oman, a small oil producer compared with its GCC neighbours, is also trying to diversify revenue sources. It implemented a 5 percent VAT a year ago.

(Reporting by Brinda Darasha; editing by Seban Scaria)