MANAMA
OMAN is considering whether to issue a US dollar- denominated sovereign bond, its first international bond since 1997 and its second ever, to facilitate debt sales by its private sector, finance minister Darwish al Balushi told Reuters.
“This year we do not plan but maybe for next year, and this is not because of our immediate borrowing requirements but because we want to pave the way for the private sector,” Balushi said on Saturday.
“We want to establish a benchmark,” he said on the sidelines of a meeting of Gulf Arab finance ministers in Bahrain.
Oman last tapped the international bond market with a $225 million eurobond in March 1997, when oil prices stood at around $20 per barrel. It sold a five-year bond at a premium of just 73 basis points over US Treasuries.
Since then, oil prices have risen sharply, to above $100 at present, so the country - which currently depends on oil for 86 percent of its budget income - has not needed to issue much debt. With the exception of 2009, it has posted budget surpluses every year since 1998.
In recent years it has sold small issues of local currency development bonds, but the ratio of its gross government debt to gross domestic product was just 6.1 percent in 2012, the second lowest in the Gulf after Saudi Arabia, compared to a peak of 38.6 percent in 1998.
Balushi said his ministry had not yet decided on the parameters of the new dollar bond but it would be at least of benchmark size; typically, that means $500 million.
“We will see. It should be something reasonable to attract investors because if it is too small, investors will not be (interested) - we want to also attract a variety of investment.” Since the uprisings elsewhere in the Arab world in 2011, pressure on Oman’s budget has increased as it has spent more to ensure social peace. Balushi estimated in January that the government would need an oil price averaging $104 to balance its budget this year.
The International Monetary Fund presented a bleak outlook for Oman’s public finances last month, predicting the budget could slip into a deficit of 3.8 percent of GDP as soon as 2015, with the gap widening to as much as 13.3 percent in 2018.
By reestablishing Oman’s presence in the international bond market, a sovereign issue could pave the way for regular deficit financing through bond issues several years from now.
Balushi said last month that spending policy would become more conservative in coming years.
He insisted on Saturday that any forthcoming sovereign bond issue would not be in response to an urgent need, and he disputed the IMF’s analysis.
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