Oman’s Credit Rating Held Steady as Fiscal Strength Offsets Regional Risks

S&P Global Ratings has affirmed Oman’s “BBB-” long-term sovereign credit rating with a stable outlook, pointing to improved fiscal conditions and strong financial buffers despite rising geopolitical tensions in the Middle East.

In its latest assessment, the agency said Oman’s liquidity position and external reserves are sufficient to shield the economy from regional shocks. Government assets exceeding 40 percent of gross domestic product and foreign reserves close to 20 percent were highlighted as key strengths supporting the country’s credit profile. However, S&P warned that a prolonged escalation involving Iran could pose a significant risk.

The report comes at a time of heightened uncertainty across the Gulf, where ongoing conflicts are affecting energy markets, trade flows and broader economic stability. Oman remains heavily reliant on hydrocarbons, which account for around 60 percent of exports and 70 percent of government revenue, leaving it exposed to fluctuations in oil prices.

Even so, current elevated oil prices—driven in part by regional instability—are providing short-term support to public finances and external balances. Over the past five years, Oman has taken steps to address structural challenges, including high deficits and slow growth, through fiscal reforms and improved governance.

S&P noted that transparency has improved, with the government increasing the availability of economic data, including quarterly GDP and fiscal reports, as well as participating in international assessments such as the IMF Article IV process.

The agency expects hydrocarbons to contribute roughly 30 to 35 percent of GDP in the coming years. Oil production is projected to rise from about 1.03 million barrels per day in 2025 to nearly 1.2 million barrels per day by the end of the decade. At the same time, Oman is expanding gas production and investing in renewable energy, including plans to produce up to one million tonnes of green hydrogen annually by 2030. State-backed firms such as Energy Development Oman and OQ are expected to play a leading role in these efforts.

Despite regional tensions, Oman’s longstanding neutral foreign policy and strong ties within the Gulf Cooperation Council are seen as factors supporting stability. The agency noted continued backing from Gulf partners, including a multibillion-dollar financial support package extended in previous years.

Looking ahead, S&P forecasts that Oman will maintain a net asset position through 2029, supported by ongoing debt reduction and strong liquidity. Government debt is expected to decline to about 31 percent of GDP, while fiscal balances are projected to remain stable, with small surpluses in the later years of the forecast period.

Efforts to diversify revenue are also progressing, with plans to introduce a 5 percent personal income tax on high earners in 2028 and improvements in tax collection already boosting non-oil income.

S&P added that solid external reserves, a modest current account surplus and a stable currency peg will continue to underpin macroeconomic stability, even as regional risks persist.