Fitch Ratings has revised, in a recent report issued this week, Oman’s outlook to stable from negative and affirmed the rating at BB-.

According to Fitch, the revision of the outlook reflects actual improvements in key financial metrics including government debt and the budget deficit that are driven by fiscal reforms and higher oil prices, and a lessening of external financing pressures relative to recent years.

Fitch has said in the report that the government has made progress with the implementation of the Medium-Term Fiscal Plan (MTFP), which aims to balance the budget and lower government debt to GDP to 61 per cent by 2025.

The agency estimates that the budget deficit narrowed from 16.1 per cent of GDP in 2020 to 3.4 per cent of GDP in 2021. It also indicated that the deficit will continue to decline to 1.6 per cent of GDP in 2022 given another strong year for oil and gas revenue, a full year of VAT revenue, lower oil and gas capex on budget (after establishing Energy Development Oman).

Moreover, the agency assumes real GDP growth to accelerate to 3.1 per cent in 2022 and steady to 2.3 per cent in 2023, driven by stronger hydrocarbon growth in 2022.

The agency expects the MTFP timely implementation will lower the fiscal breakeven oil price to around US$60 per barrel in 2024-2025 from above US$80 per barrel in the past five years.

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According to Fitch, Oman’s credit rating might be upgraded in case the government has broadly committed to implementing fiscal balance programmes or oil prices exceeded the expected levels.

It is worth noting that Moody’s had recently revised its outlook on Oman from stable to positive, while earlier this year, S&P Global Ratings revised its outlook from stable to positive.

This can be attributed to the policy responses to economic and health challenges and improved oil prices, which will reduce fiscal deficits and slow the increase in net government debt.