Serrari Group

Oman's Debt Market Contracts to $44 Billion, Fitch Reports

Oman’s debt capital market experienced a 7% year-on-year decrease, reaching $44 billion in 2023, according to Fitch Ratings. This contraction was primarily due to the government’s proactive debt repayment strategy, utilizing surplus funds generated by elevated oil prices.

Despite the overall downturn, there was a notable shift in market dynamics. The proportion of sukuk, Islamic bonds adhering to Sharia principles, increased to 21.1% from 18% in 2022. This trend reflects a growing preference for Sharia-compliant financial instruments within Oman’s financial sector.

While Oman’s debt market remains comparatively small among GCC nations, the government has implemented measures to stimulate growth. Initiatives such as the Sukuk and Bond Regulation introduced by the Financial Services Authority and the Ministry of Finance’s sustainable finance framework aim to nurture market development.

These regulatory reforms are expected to bolster investor confidence, particularly among those sensitive to Sharia principles and ESG considerations, according to Fitch’s report.

Despite a significant decline of 56% in bond issuance, which totaled $4.8 billion in 2023, sukuk issuance witnessed a remarkable surge of 231%, amounting to $1.2 billion during the same period.

Fitch Ratings, which has assigned a ‘BB+’ rating to nearly $7.5 billion of outstanding Omani sukuk, highlighted Oman’s resilience following its upgrade to ‘BB+’ with a “stable” outlook in September 2023.

However, Fitch anticipates a gradual growth trajectory for Oman’s debt market in the near term. The government’s budget for 2024 underscores a continued commitment to debt reduction, albeit with a focus on increased social spending. Consequently, while the debt capital market is expected to expand over the medium-to-long term, short-term growth may be modest.

Looking ahead, government-driven initiatives and ongoing issuance by sovereign and government-related entities are poised to drive the expansion of Oman’s debt capital market, as outlined in the Fitch report.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

5th April, 2024

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