Mubasher: Moody's Investors Service on Thursday assigned a provisional (P)Baa1 senior unsecured issuance rating to the proposed USD-denominated global notes that will be issued by the government of the sultanate of Oman.

"Moody's expects to remove the provisional status and assign a definitive rating upon the closing of the proposed issuance and a review of the final terms," the ratings agency said in a statement.

The proposed global notes "constitute direct, unconditional and unsecured obligations of the government of Oman and rank pari passu with all other outstanding unsecured obligations," Moody's said, noting that the proceeds from the notes will be used for general budgetary purposes.

Hence, the provisional rating of (P)Baa1, which is in line with the government's issuer rating of Baa1, it added.

Oman's Baa1 long-term issuer rating entails the negative impact of low oil prices on the sultanate's economy, government finances, and the external payments position against high levels of per capita income and a still comparatively strong government balance sheet, the report showed.

Despite "credit positive economic diversification efforts", the Omani economy continues to rely heavily on the oil and gas sector, and its competitiveness remains under pressure, Moody's noted.

"Although the drop in oil prices has reduced the share of the hydrocarbon sector in nominal GDP, it still accounts for almost one third of GDP and more than half of total merchandise exports", the report revealed, noting that Oman has "the second-lowest level of proven reserves" among its GCC counterparts. Moreover, the use of enhanced recovery technologies has increased production costs.

Oman's ranking in the 2016-2017 World Economic Forum Global Competitiveness Index declined to 66th out of 138 countries from 62nd out of 140 countries the year before, marking a fall for the fourth successive year, and making it the lowest of all GCC countries.