Oman turns to bond markets to fill oil revenue void

Oman's cash-strapped ministry of finance is preparing to wade back into the debt markets to help it cope with the squeeze on oil export revenues.

The finance ministry said it has appointed Bank Muscat, Oman's largest lender, for the country's third sukuk, or Islamic bond offering. Targeting small investors, the bond will be offered in Omani rials. The ministry said it is "working to complete its funding plan, which includes an international bond and sukuk offering to fund the remainder of its needs this year".

So far this year, Oman has issued local development bonds worth 550mn Omani rials ($1.43bn), along with a bridge loan for another OR770mn, the ministry said. It did not provide any further details on the international bond.

Oman's heavy reliance on debt to plug a widening budget deficit led to a rise in the country's debt-to-GDP ratio to nearly 60pc in 2019 from 15pc just four years earlier. Given negative outlooks by all three major ratings agencies, tapping the bond markets to fill the deficit will not come cheap. Last month Fitch downgraded Oman to BB- and forecast a fiscal deficit of nearly 20pc of GDP in 2020, or around OR4.8bn. This is almost double what Oman itself projected when setting its 2020 budget in January.

Oman, the Mideast Gulf's largest non-Opec oil producer, has pledged to cap its crude output at 722,000 b/d from August to December under the latest Opec+ agreement, well below its capacity. The Opec+ alliance, which brings together Opec's 13 members with 10 non-Opec producers led by Russia, agreed to take a combined 9.7mn b/d off the market in May and June and 9.6mn b/d in July. The cuts moderated to 7.7mn b/d from last month and will ease further to 5.8mn b/d from January 2021 to April 2022.

By Adal Mirza