Oman in negotiation with banks for loan of nearly $1 billion: Reports

As the oil-producing Gulf state seeks more funding ahead of heavy debt redemptions over the next two years, Oman is negotiating a loan of at least $1 billion with a group of banks, sources said.

Oman, which has been ranked below investment grade by all major credit agencies, issued $2 billion in bonds last month in an agreement that saw disappointing demand in part because of investor concerns about the worsening credit trajectory of the country.

It is currently in negotiations with banks for a loan that would refinance $1 billion of existing bank debt due in January, sources familiar with the matter said. It is also speculated that the new facility could exceed $1 billion.

Oman’s ministry of finance did not offer any comments.

In addition to the $1 billion loan due in January, which it took out in 2016 after oil prices collapsed, Oman has $1.5 billion in international bonds due in June, data reveals.

S&P Global Ratings, which downgraded Oman last month, said external debt maturing in the next two years came to $10.7 billion, or about 7.5 percent of gross domestic product (GDP).

“Oman will continue to rely on external debt to fund its large government deficits and maturing debt and remain vulnerable to shifts in investor sentiment,” the ratings agency said last month.

In the past few years, after oil prices plummeted from more than $115 a barrel in June 2014 to less than $30 in January 2016, the oil producer has accumulated debt at breakneck speed.

At the same time, Oman’s plans to diversify its economy and introduce sensitive tax and subsidies reform dragged under Sultan Qaboos, who died in January this year after half a century in power.

Under Sultan Haitham, Oman’s new ruler, a fiscal reform plan aims to bring the fiscal deficit down to 1.7 percent of GDP by 2024, from a 15.8 percent preliminary deficit this year.

Oman will introduce a 5 percent value-added tax (VAT) from April 2021 as part of the planned reforms and is also looking to introduce a high-earner income tax in 2022, a first for the Gulf Cooperation Council (GCC) States.