Oman picked banks including Citigroup Incand HSBC Holdings Plc for its second Islamic bond offering this year.
Citigroup, Gulf International Bank, HSBC, Standard Chartered Bank, Bank ABC and Bank Muscat will arrange an investor call on Monday, according to a person familiar with the matter. Oman’s debt is rated junk by all three major credit assessors and it last tapped the international debt market in January, raising $3.25 billion.
Oman is taking advantage of investors’ demand for high-yielding bonds, which are less sensitive to US interest rates. The sultanate’s dollar bonds have gained 4.4 percent this year to outperform all of its Gulf Arab peers, according to Bloomberg Barclays indexes.
The country’s public finances, long among the weakest in the Gulf Arab region, remain vulnerable to oil-price swings and disruptions from the global pandemic. The finance ministry has said that as of end-March it was more than halfway to meeting its total funding needs of 4.2 billion rials ($10.9 billion) for this year, thanks to borrowing and drawdowns from the country’s wealth fund.
Since taking power in January 2020 following the death of his long-time predecessor, Sultan Haitham bin Tariq has embarked on dramatic measures to bolster Oman’s coffers. The effort has included cutting subsidies, introducing a value-added tax and even planning an income tax -- which would be a first for an Arab Gulf state -- as part of a medium-term plan to overhaul the economy.
But Oman’s drive to cut spending by weaning thousands of state employees off government jobs may be in peril after days of rare protests. Last month, security forces clashed with dozens of Omani demonstrators, who gathered in the industrial city of Sohar to complain about record unemployment and worsening economic conditions.
Fitch Ratings forecasts Oman will run a deficit of 6.1 percent of gross domestic product this year and 5 percent in 2022, compared with over 18 percent in 2020, as higher oil prices and fiscal measures by the government bring in more revenue. In the first quarter, Oman’s deficit widened to 751.4 million rials, from 26.3 million rials in the same period last year.
Fiscal deficits and external debt maturities will total $9 billion to $10 billion per year -- or about 13 percent of GDP -- in 2021-2022, according to Fitch.