S&P downgrades Oman’s sovereign rating as the country grapples with plummeting oil wealth

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The impact of lower oil prices has been particularly bad for the economy of Oman, the biggest oil producer in Gulf outside of OPEC.

An uncertain scenario regarding oil prices owing to a resurgence of coronavirus cases leading to muted demand has cast a shadow on the country’s finances.

The precarious state of Oman’s public finances has led S&P Global to cut its sovereign rating to B+, the second downgrade this year, Bloomberg reported.

This follows a revision by Fitch Ratings and Moody’s who have downgraded Oman’s ratings twice so far this year.

“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,” Bloomberg quoted S&P as saying. “This is partly driven by our assumptions of restrained oil price growth and slow economic recovery from the Covid-19 pandemic,” it added.

Plummeting oil wealth has been a cause of grave concern for the Gulf economies as they stare at worsening finances amid further uncertainty regarding global demand as a second wave threatens recovery.

The IMF in its latest forecast has further revised down economic growth of all the major gulf economies except Saudi Arabia. Oman’s economic growth will see the biggest contraction at 10 per cent. It is the only country among its Gulf peers that won’t see a rebound next year too, according to IMF.

The country also announced imposition of 5% VAT joining the rest of GCC neighbours in a move to address fiscal concerns along with spending cuts initiated earlier.

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