DUBAI - Oman is likely to issue bonds this year but may need to lean on aid from its wealthier Gulf neighbours or resort to help from the International Monetary Fund (IMF) if it does not, MUFG's head of Middle East research said on Monday.
One of the weakest economies in the oil-rich Gulf region, Oman has so far not tapped the international debt markets despite a widening fiscal deficit amid a slump in oil prices and subdued demand due to the coronavirus pandemic.
Ehsan Khoman, MUFG's head of MENA research and strategy, said Oman will likely tap the international debt markets because it would not want to draw down too much on its foreign reserves.
The finance ministry did not immediately respond to a request for comment.
Khoman also said Oman can issue bonds because Bahrain, the only other junk-rated Gulf country, has already done so amid the pandemic, raising $2 billion in May.
"If it was to not tap the market, it would need to get that liquidity from somewhere else. So, maybe GCC states, maybe the IMF," Khoman said, referring to the six-member Gulf Cooperation Council.
He said the Bahraini dinar and Omani rial, which are pegged to the dollar, have seen some pressure in the forwards markets, though that pressure has "come down quite sharply" in the past month.
"Our baseline scenario is that Oman will continue to comprise adequate reserve buffers to sustain the currency peg over the medium-term. Though if market risk appetite were to sour, which could lead to an acceleration of asset depletion, then confidence in the peg could diminish," Khoman said.
(Reporting by Yousef Saba; Editing by Bernadette Baum) ((Yousef.Saba@thomsonreuters.com; +971562166204))
