Oman Rating Affirmed at BBB- by S&P As Fiscal Buffers Offset Gulf Risks

JEDDAH: S&P Global Ratings has affirmed Oman’s “BBB-” long-term foreign and local currency sovereign ratings with a stable outlook, citing its improving fiscal position despite ongoing geopolitical risks in the Middle East. 

In its latest report, S&P said the stable outlook reflects its view that the sultanate’s fiscal and external buffers — including liquid government assets exceeding 40 percent of GDP and foreign reserves near 20 percent — are sufficient to safeguard creditworthiness against geopolitical risks. A prolonged escalation involving Iran remains the key exception. 

The analysis comes amid heightened geopolitical conflicts in the Gulf, which are increasing regional uncertainty and raising concerns about energy markets, trade flows, and security conditions.  

S&P highlighted that Oman’s exposure to hydrocarbon revenues, which account for around 60 percent of exports and 70 percent of fiscal income, leaves the economy vulnerable to oil price volatility. However, it noted that current market dynamics, including elevated oil prices driven by regional instability, are temporarily supporting both fiscal and external balances. 

“Over the past five years, Oman has made progress in addressing significant structural challenges, including high budgetary and external deficits, and subdued economic growth,” S&P said in its report, adding that this includes government efforts to structurally reform public finance and address governance issues, which in part have been aided by a supportive oil market. 

The agency emphasized that transparency has also improved with increased data disclosure, including quarterly real GDP data, quarterly fiscal data, and an annual international investment position, in addition to participation in the IMF Article IV process. 

“Regional instability remains high and could influence policy responses in the medium term,” the release noted. 

S&P expects hydrocarbons to account for about 30 percent to 35 percent of Oman’s GDP, with oil production projected to rise from around 1.03 million barrels per day in 2025 to about 1.2 million barrels per day by 2027–2029. 

While diversification efforts continue, the energy sector is expected to remain a key growth driver in the near term. Oman is also expanding gas output and advancing plans to produce up to 1 million tonnes of green hydrogen by 2030, with state-owned firms such as Energy Development Oman and OQ playing central roles. 

Despite heightened regional tensions, S&P expects Oman to remain relatively resilient to geopolitical shocks, supported by its neutral foreign policy and strong Gulf Cooperation Council ties. 

“Oman has historically maintained good relationships with its neighbors, preserving its traditional role as a neutral player and mediator in the region. We anticipate Oman’s Gulf Cooperation Council (GCC) neighbors to remain supportive partners, as demonstrated by a $10 billion funding package extended to Oman in 2011 by GCC countries ($2.5 billion each), of which $2.3 billion has been used as of December 2025,” S&P said. 

Although instability is currently heightened, the agency expects Oman to remain resilient to regional geopolitical conflicts. 

S&P said Oman is expected to maintain a net general government asset position through 2026–2029, supported by continued deleveraging and liquid assets of around 40 to 41 percent of GDP, while gross government debt is projected to decline to about 31 percent of GDP by 2029. 

It forecast the fiscal position to remain balanced in 2026, followed by small surpluses averaging about 0.4 percent of GDP over 2027–2029, supported by stable oil prices, modest production growth, and contained spending. 

The agency added that Oman is advancing nonhydrocarbon revenues, including plans to introduce a 5 percent personal income tax in 2028 on high earners, alongside improved tax administration, with tax revenue already accounting for about 15 percent of total revenue. 

It said expenditure is expected to remain near 28 to 29 percent of GDP, with fiscal buffers, subsidy reforms, and savings mechanisms helping maintain flexibility. 

It also noted that strong external buffers, including reserves of about $19 to 21 billion and a current account surplus near 2 percent of GDP, alongside a stable currency peg, will continue to support macroeconomic stability.