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Tuesday, October 25, 2016

Govt of Oman to borrow $10 bn from foreign markets!

Govt to borrow $10 bn from foreign markets

By Conrad Prabhu & Vinod Nair — MUSCAT: Oct 24: 

The government will cover 60 and 70 per cent of this year’s budget deficit and raise nearly $10 billion through external borrowings such as eurobond issues, direct placements of debt and other instruments.

Speaking at the Outlook Oman forum, on Monday, Hamood bin Sangour al Zadjali, Executive President, Central Bank of Oman (CBO), said the rest of the deficit will be financed locally by drawing from the State General Reserve Fund (SGRF). He said the combination of external and domestic borrowings will roughly be in the ratio of 60:40. 
International borrowings will include a mix of Euro bonds, direct placements and deposits taken from international funds. The balance 40 per cent will be drawn from the reserves of the country — SGRF and issue of bonds and sukuk, he said.
The deficit doubled to RO 4.02 billion ($10.5 billion) in the first eight months of this year from RO 2.39 billion a year ago as low oil export prices cut into the state revenues. The original 2016 budget plan had envisaged a state expenditure of RO 11.9 billion and revenues at RO 8.6 billion. 
Zadjali said the country did not plan any more international borrowing this year, but will issue domestic bonds to the tune of RO 150 million in December, bringing the total domestic bond issuance this year to RO 450 million. 
He said the steep drop in international oil prices — the mainstay of revenues for the Sultanate — is expected to create budgetary shortfalls “for some time”.

Zadjali, however, assured there was enough liquidity in the market and “banks are investing in government papers as well, so the government is able to pump that money back into the economy”. 
“We have streamlined some of our regulations to make sure big contractors and sub-contractors executing government projects are not affected by payment delays. So far, the government has paid most of the contractors’ dues, but maybe there are some outstanding amounts,” he said. 
“We have told the banks to be flexible in the treatment of their clients – main contractors and sub-contractors – and we have allowed them to give them some grace period for these accounts, and support them whenever there is a need.”

Boding well for Oman are favourable international lending terms, said Al Zadjali. “Our debt ratio prior to 2015 has been very low, while the global interest rate continues to be benign. The reputation of the Sultanate in terms of borrowings is very good too. We have seen a big appetite on the part of lenders to lend to Oman.” 
At the same time, the government has taken steps to address the fiscal situation domestically, he said. Besides spending cuts, the government continues to explore new streams of revenue to offset the big drop in oil revenues, he noted. The apex bank has taken steps to maintain financial stability in the Sultanate, he said. 
“The financial sector consisting of banks and other financial institutions have to be sound and resilient, and should be able to support the private sector to take on a bigger role in economic development. We have made sure the banking sector is strong and resilient.” 
Sheikh Abdullah Salem al Salmi, executive president, Capital Market Authority (CMA), said the government expects to raise RO 2 billion in the next five years by privatising some companies.

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