World Economy

Oman to Cover Deficit With Foreign Borrowing

Oman to Cover Deficit With Foreign BorrowingOman to Cover Deficit With Foreign Borrowing

Oman’s government is covering between 60 and 70% of this year’s budget deficit via international borrowing such as eurobond issues, direct placements of debt and other instruments, the central bank’s executive president said.

The rest of the deficit will be financed locally by drawing down financial reserves, such as money held by the State General Reserve Fund, a sovereign fund, and issues of bonds, Hamood Sangour al-Zadjali told an economic conference on Monday, Reuters reported.

The reliance on international financing is a big shift for Oman, which has seen its state finances severely damaged by low oil prices.

Earlier this year, the government returned to the international bond market for the first time in two decades.

The budget deficit almost doubled to 4.02 billion rials ($10.5 billion) in the first seven months of this year from a deficit of 2.39 billion rials a year earlier, as low oil export prices slashed state revenues.

The original 2016 budget plan envisaged state expenditure of 11.9 billion rials ($30.9 billion) and revenues at 8.6 billion rials ($22.3 billion). Officials said their 2016 economic plans assumed an average oil price of $45 a barrel.

Zadjali said on Monday that Oman did not plan any more international borrowing this year, but that the government would issue 150 million rials of domestic bonds in December, bringing the total domestic bond issuance this year to 450 million rials.

Senior officials also described long-term plans to raise fresh money for the government and strengthen the economy in an era of cheap oil.

The government expects to raise 2 billion rials in the next five years by privatizing some companies, said Sheikh Abdullah Salem al-Salmi, executive president of the Capital Market Authority.

He told Reuters that state-owned Muscat Electricity Distribution Co expected to sell 50% of its shares in an initial public offer by the end of this year.

Minister of Commerce and Industry Ali bin Masoud al-Sunaidy said the government would accelerate a drive to diversify the economy and create non-oil jobs, offering private companies opportunities to partner with the government on projects.

Meanwhile, Oman Oil Company Exploration & Production has appointed Sumitomo Mitsui Banking Corp as financial advisor to arrange a loan which is likely to be in excess of $1 billion, banking sources told Reuters.

The upstream oil and gas company, a subsidiary of state-owned Oman Oil Co, is expected to raise the financing early next year, the sources said, adding that talks were still at an early stage.



Add new comment

Read our comment policy before posting your viewpoints