Mubasher: Oman plans to tap the debt market for the fourth year after its budget deficit rated as one of the largest of all sovereigns by Fitch Ratings.
However, bond investors remain cautious about investing in Oman’s bonds after Bahrain’s financial crisis following a ratings cut by Fitch in March 2018, Bloomberg reported.
The cash-strapped sultanate’s bonds are cheaper than those of the other GCC nations.
Although Oman is rated by Fitch two levels higher than Bahrain or at BB+, its 7% bond, due in 2028, yields about 40 basis points more than Bahrain’s debt of similar maturity.
Emirates NBD Asset Management picked up Bahrain’s bonds after falling in March following the Fitch downgrade. The Dubai-based money manager kept its distance from the Omani bonds after the ratings agency cut Oman’s debt rating to junk in December.
Purchasing the debt without reforms would necessitate a “leap of faith”, Emirates NBD Asset Management head Salman Bajwa stated.
“In order to secure a GCC support package similar to that given to Bahrain, Oman would have to undertake serious budgetary reforms, and would also have to see a change in its more neutral political orientation to a more pro-Saudi position,” the Federated Investors’ emerging-market portfolio manager Mohammed Elmi said.
Compared to neighbouring GCC members, Oman has been slow to implement reforms after a sharp in oil prices hit its budget in mid-2014. This decline in crude prompt other GCC states to execute reforms as their budget surpluses turned to deficits for the first time in years.
Saudi Arabia undertook is National Transformation Programme 2020 and its Vision 2030, through which it has been working to diversify its economic resources away from oil. The UAE was the least affected by the oil downturn as its economy was already diverse. Other GCC member states have undertaken similar measures, whereas Oman lagged.
The sultanate’s government debt is projected to surge to 58% of gross domestic product (GDP) by 2020, from 48% in 2018, according to Fitch, while the GCC nation’s net foreign assets are expected to fall to 8% of GDP in 2020 from 7% in 2018.
