Sovereign Credit Profile
Oman’s sovereign credit trajectory has been one of the most dramatic improvements in EMEA fixed income:
Rating timeline:
- 2020: Ba3/BB-/BB (speculative grade across agencies)
- 2021: Ba2/BB/BB (first upgrades under Sultan Haitham)
- 2022: Ba1/BB+/BB+ (further upgrades with first fiscal surplus)
- 2024: Ba1/BB+/BB+ (stable, approaching investment grade threshold)
Investment grade threshold: Ba1/BB+ is one notch below investment grade (Baa3/BBB-). Achieving investment grade would trigger passive fund index inclusion and significant demand from investment-grade-only mandates.
Debt Market Access
Oman issues debt through:
- Eurobonds: USD-denominated international bonds (active issuance, multiple outstanding lines)
- Sukuk: Islamic bonds (both domestic and international)
- Government development bonds: Domestic OMR-denominated, limited international access
- Bilateral/multilateral loans: Development finance institutions, bilateral government facilities
Spread Analysis
Oman’s USD Eurobond spreads over US Treasuries (approximately 150-200 basis points for 10-year maturity as of early 2025) represent a significant premium over investment-grade GCC peers (Saudi Arabia: 80-100bp, UAE: 60-80bp). If Oman achieves investment grade, spread compression of 50-100bp would deliver significant capital appreciation for current holders.
The Investment Grade Story
The path to investment grade requires:
- Sustained fiscal surplus (2+ more consecutive surpluses beyond 2024)
- Continued debt reduction (toward 30% of GDP)
- Non-oil revenue growth (VAT + other revenues reducing oil price sensitivity)
- Green hydrogen commercial progress (new export revenue stream certainty)
The 2025-2027 period is critical. If oil prices remain above $70/barrel and Vision 2040 reforms continue, investment grade is achievable by 2026-2028.