Ratings agency Moody's has downgraded Oman's sovereign rating to junk status.
The ratings agency said in a note early on Wednesday morning that the long-term issuer and senior unsecured bond ratings of the Government of Oman had been downgraded to Ba1 from Baa3, and said the outlook on its finances remains negative.
“The key driver of the downgrade is Moody's expectation that the scope for fiscal consolidation will remain more significantly constrained by the government's economic and social stability objectives than it had previously assessed,” the agency said in its note.
It added that measures that were announced in early 2018 to improve Oman's deficit had been delayed, stating that the scope for fiscal consolidation was “very limited”, given the challenges the government has faced in introducing new, non-oil revenue measures and a desire to preserve current living standards.
“As a result, in an environment of moderate oil prices, Oman's fiscal metrics will weaken to a level that is consistent with a lower rating,” Moody's note said.
It said although Oman had “inherent credit strengths” that would provide some resilience to potential future shocks, the persistently wide deficits the country was running meant Oman was dependent on inflows of external financing. It also said that “foreign investors' willingness to finance Oman's large deficits at relatively low costs could weaken”.
Moody's is the last of the three major ratings agencies to downgrade Oman's sovereign debt to junk status. Fitch Ratings downgraded Oman's debt to junk status in December, and in a note on GCC budgets published in January, it said that it expected Oman's fiscal position in 2019 “to be tighter than budgeted as lower-than-expected oil revenues limit the scope for additional spending”.
S&P Global downgraded Oman's bonds below investment grade in May 2017.
(Writing by Michael Fahy; Editing by Mily Chakrabarty)
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