S&P Global Ratings said members of the Gulf Cooperation Council would likely come to Oman’s rescue if the sultanate experiences “significant external liquidity pressures,” especially in a situation that threatens its currency peg to the dollar.
“In the event Oman’s external reserves deteriorate significantly, we expect that financial support from neighboring GCC countries would be forthcoming,” S&P analysts including Zahabia Gupta said in a report Monday. “If one country’s peg were to fall, the contagion effects could be severe for the rest of the GCC.”
- S&P’s baseline scenario is that the government will meet its funding needs -- totaling almost $50 billion over 2020-2023 -- through debt issuance abroad and at home, drawdowns of domestic and external liquid assets, and other financial transactions
- Oman’s fiscal deficit estimated at 17.5% of gross domestic product this year, up from 9.7% in 2019
- The economy is projected to shrink 4% in 2020 before accelerating next year
- If market access doesn’t improve for the rest of the year, the government is expected to use the Petroleum Reserve Fund to repay its $1.2 billion of external debt redemptions
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