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Oman considering financial assistance from Gulf states after battering from coronavirus and low oil prices

Oman has seen a major economic downturn this year [Getty]

Date of publication: 20 October, 2020

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Oman has struggled financially after years of low oil prices.

 

Oman is considering possible financial assistance from Gulf states, after the sultanate's economy took a double battering this year from low oil prices and the coronavirus crisis, Reuters has reported.

Bond prospectus seen by the news agency on Monday indicated that the sultanate might seek support from wealthier Gulf neighbours to help it deal with a budget deficit.

"Whilst discussions in relation to financial support have commenced with certain other Gulf countries, such discussions are only in preliminary stages," the prospectus reads.

Oman has made cuts to government spending, is planning on issuing more dollar-denominated bonds, and will introduce VAT from next year, but might still have to seek outside assistance.

Last week, Oman saw its credit rating cut for a second time this year by S&P Global Ratings to B+.

Moody’s Investors Service and Fitch Ratings have also both cut Oman credit rating twice this year, according to Al Jazeera, due to low oil prices and the Covid-19 epidemic.

"Oman's public sector finances, as indicated by the net debt level, will materially weaken over the next three years, notwithstanding the implementation of measures to reduce fiscal deficits," S&P reported.

"This is partly driven by our assumptions of restrained oil price growth and slow economic recovery from the Covid-19 pandemic."

Oman is expecting fiscal deficits and external debt maturities to run between $12 and $14 billion a year between 2020 and 2022, according to Fitch Ratings.

In another worrying sign, Muscat is set to rack up a budget deficit of 19 percent of its GDP this year, according to the IMF.

In June, Bloomberg reported that Oman was in talks with Gulf states on possible financial assistance to help it deal with the shortfall.

Yet Oman's long-established policy of neutrality will likely be considered when making a decision on financial assistance from Gulf states.

Unlike neighbours Saudi Arabia and the UAE, Oman has good relations with Iran and has not joined a blockade on Qatar.

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