Moody’s assigns (P) Baa2 rating to Oman’s new global MTN programme

Muscat - 

Moody's Investors Service on Friday assigned a provisional senior unsecured foreign currency programme rating of (P) Baa2 to the new global medium-term note (MTN) programme by Oman. The rating mirrors Oman's long-term issuer rating of Baa2 with negative outlook, Moody's said in a statement.

The ratings agency said according to the draft base prospectus, the notes to be issued under the new global MTN programme will constitute direct, unconditional and unsecured obligations of Oman and will rank pari passu with all other senior unsecured debt obligations of the sultanate. “The proceeds of the notes to be issued under the programme are intended to be used for general budgetary purposes of the issuer,” the agency added.

It said that Oman's credit strengths include its high wealth levels and a still comparatively strong government balance sheet. It said risks are comparatively low that contingent liabilities from the banking system or non-financial public sector will crystallise on the government's balance sheet as growth slows.

“Although Moody's expects Oman’s debt to rise to close to 50 per cent of GDP by 2018 from less than five per cent at the onset of the oil price shock, Oman's holdings of financial assets (estimated at around 60 per cent of GDP in 2017) will provide support through its fiscal and external adjustment,” it said. It added its negative rating outlook on Oman's issuer rating reflects that risks to Oman's rating are skewed to the downside.

“Despite diversification efforts, Oman's government finances and external accounts remain highly susceptible to oil price swings. The government's increased reliance on international debt issuance introduced an element of susceptibility to international capital flow volatility and potential tightening market funding in an environment of rising global interest rates,” it added.

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