Arabia Monitor quoted in Debtwire's article 'Oman’s proposed triple-tranche deal will need juice to fly'

Debtwire previews Oman's upcoming US dollar-denominated five-, 10- and 30-year Eurobond and lists major risk factors including questions over economic development, a potential ratings downgrade and political issues pertaining to the succession of the country’s ruler Sultan Qaboos.

Oman’s Ninth Five-Year Plan for (2016-2020), a five-year development plan to achieve Vision 2020 objectives, aims to promote economic diversification and stimulate private sector activity. “The Ninth Five-year Development Plan (2016-2020) targets an average annual growth rate of 3% and total government investments of USD 21.2bn,” said Dr Florence Eid-Oakden, Chief Economist at Arabia Monitor.

“This target is lower than the previous plan (2011-2015), which had allocated USD 31bn to investment and aimed for 5% growth. The Five-Year Plan reflects more prudent and realistic goals. Many items have been revised when compared with actual averages observed over 2011-2015,” she added. “Oman is still suffering from the downturn in oil prices. While prices have risen since their lows in 2015, Oman’s oil reliant economy is still threatened,” said Eid-Oakden.

In addition, under the recent OPEC agreement, Oman has also agreed to cut production by between 5%-10%, further reducing government revenue in the short term," she added. "Despite these constraints, Oman is pushing ahead with fiscal consolidation and re-doubling efforts to diversify the economy and attract new investments to compensate for lost revenue from oil.”

The 2017 budget projects a deficit of USD 7.7bn, equivalent to 12% of GDP, compared to USD 13.7bn in 2016, equivalent to 21% of GDP, Eid-Oakden continued. “We consider this a significant improvement, especially since Oman’s fiscal balance on average over the last five years was balanced.” "The 2017 deficit is expected to be financed from borrowings (84%) and reserves (16%), compared with the 2016 budget which was financed from borrowings (36%), reserves (46%), and grants (18%),” she said.

Read the full article here.