September 3rd 2020


Oman: risk assessment
sector risk
structure risk
August 2020 B B B BB CCC B
Nicholas Fitzroy (lead analyst); Pat Thaker (analyst). Published 21 August 2020, 2100 GMT.

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Sovereign risk

Sovereign risk is B-rated. Public debt has risen sharply on the back of a large fiscal deficit, rapidly increasing debt-servicing costs. The collapse in oil prices and the coronavirus-induced recession in 2020 will intensify pressure on the fiscal position, although the sultanate's two sovereign wealth funds will provide a repayment cushion in the short term.

Currency risk

Currency risk is rated B. Although export earnings are falling as a result of lower global oil prices, policymakers are committed to the rial's peg to the US dollar, which is backed by a large (albeit declining) stock of foreign reserves. However, given the scale of the external financing shortfall, financial support from Oman's Gulf neighbours may be necessary to maintain the peg.

Banking sector risk

Banking sector risk is also B-rated. Asset quality will worsen considerably following the oil price slump and pandemic-associated downturn. However, strong supervision and credit risk-management systems should support banks in the challenging economic climate in 2020‑21.

Credit risk score graph

Political risk

Political risk is BB-rated. Given the steep economic downturn, and the need for the new sultan to introduce fiscal austerity measures in response to the soaring fiscal deficit, discontent will build, leading to large-scale street protests.

Economic structure risk

Economic structure risk is CCC-rated. Oil sales generate more than 70% of government revenue and almost all export earnings, reflecting slow progress on economic diversification, which aims to increase employment and non-oil revenue. Diversification will be put on hold as slumping prices drive down revenue and the government focuses on mitigating the impact of the pandemic.

Risk | Credit risk

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