Index Trend Previous Quarterly Editions
Expropriation Risk: 45 ► Political Violence Risk: 35 ► Terrorism Risk: 5 ► Exchange Transfer and Trade Sanction Risk: 45 ► Sovereign Default Risk: 7 47 ►
Overall Risk Temperature TREND ►
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Special topic: crisis Protest intensity to date* Low Low Unrest risk in 2024** High High
Higher oil and gas revenues since 2022 have provided Oman with some much-needed leeway after a period of rapid rises in the ratio of debt to GDP and in the fiscal deficit in the period between 2014 and 2020. As 2022 saw Oman record its first budget surplus since 2014, the government did not have to resort to borrowing or to withdrawing from reserves to finance the deficit. The improving fiscal position has been recognized in the upgrading of Oman’s credit rating by the three major agencies in 2022 to 2023, which further strengthens the government’s position. The risk of default or of any meaningful threat to political or economic stability has receded significantly as a result.
Expropriation Risk 45 (Medium) TREND ►
Exchange announced that it was allowing 100% of foreign ownership in joint stock companies in Oman. This is intended to revive the local exchange, increasing its liquidity and strength, and to signal a greater openness to foreign capital in general.
Like its Gulf peers, Oman is looking to capitalize on high energy prices to list upstream and downstream assets in the energy sector. In March 2023, OQ, the state energy firm, raised US$244 million from a 49% share sale in its drilling unit, Abraj Energy. Oman intends to use the cash to finance development spending in the non-oil economy (port infrastructure and tourism) and to move up the hydrocarbons value chain (petrochemicals).
In October 2023, the OQ Gas Network of pipelines will list 49% of its shares on the Muscat Stock Exchange. The moves toward privatization (including public-private partnerships) and encouraging foreign investment suggest that expropriation risks will be very low. Even so, the entrenched economic interests of politically well-connected merchant families mean that market access will be challenging.
Political Violence Risk 35 (Medium-Low) TREND ►
In past years, Oman has seen bouts of popular anger on the streets, fueled mainly by rising unemployment and perceptions of official corruption. There have also been calls for jobs, higher salaries, reduction in the government’s media control and reduced numbers of foreign workers, to help Omanis find private sector jobs.
Under Sultan Haitham, societal pushback has been seen against public sector austerity and tax measures along with their wider economic effects (as demonstrated by the unemployment protests in May 2021).
The current high-oil-price environment will generate fiscal surpluses that will increase pressure on the sultan to extend government largesse to Oman’s unemployed and accelerate public sector hiring. Plans announced in 2020 for the first income tax on high earners in any Gulf State, initially expected for 2022, are on hold.
Terrorism Risk 5 (Extremely Low) TREND ►
Oman has no terrorism; policing and security provisions are effective. This situation is unlikely to change in coming years, although signing a peace treaty with Israel — which is a hypothetical — could open the way for radical groups to target government and Western assets.
Exchange Transfer and Trade Sanctions Risk 45 (Medium) TREND ►
Oman has adequate buffers to finance goods imports and maintain the currency’s peg to the U.S. dollar. Reserves usually hover around the equivalent of six to seven months of imports. The stability of the reserves is sensitive to oil prices and is therefore rising with the current strength of oil market conditions.
Sovereign Default Risk 47 (Medium) TREND ►
In August 2022, Fitch upgraded Oman’s credit rating by one notch and in April 2023 revised its outlook from “stable” to “positive.” Prior to the upgrade, the agency had downgraded Oman four times since initiating its coverage in 2017. Standard & Poor’s followed suit with an upgrade in November 2022, as did Moody’s in May 2023. These reflected Oman’s fiscal strength, with oil prices trading at or above Oman’s fiscal break-even price of around US$80 per barrel.
Oman has said that it will use the windfall to step up repayments of its external debt, which will further reduce default risks. A fiscal surplus of US$3 billion in 2022 reversed nearly a decade of budget deficits, giving Oman the fiscal space to strengthen its foreign currency reserves, with a further surplus of US$1.7 billion recorded for the first half of 2023.
Since Sultan Haitham bin Tariq succeeded his cousin, Sultan Qaboos bin Said, in 2020, the authorities have developed and largely implemented a medium-term fiscal plan, covering the period to 2024, which was designed to reverse what threatened to become an unsustainable growth of debts and deficits in Oman. In the years preceding 2020, debt repayments had taken up increasingly large proportions of government funds, with billions of dollars in repayments due, including for Chinese loans that had financed infrastructure development projects. Greater fiscal balance since 2022 has significantly eased the pressures that had been building across all macroeconomic indicators.
Protests in May 2021 across Oman highlighted the risks to political stability and public finance of popular frustration at issues such as youth unemployment and the introduction of new taxes and fees, including value-added tax, as well as the incremental removal of universal price subsidies for electricity and fuel. Government responsiveness in engaging with the issues that prompted the protests meant that they did not spread and have not recurred. In July 2023, a new Social Protection Law issued by royal decree broke new ground in extending social protections in the Gulf and in pursuing a workable balance between economic reform and social justice.
Oman has a backstop in the form of financial support from other members of the Gulf Cooperation Council (GCC) if economic pressures threaten to spill into political instability. A GCC aid package was extended to Oman and Bahrain in 2011 after political upheaval that, in Oman’s case, was motivated by public anger at corruption and unemployment.
Such assistance would likely be forthcoming again should the need arise in the future. Support from neighboring states is currently focused on increased investments and joint ventures, such as enhanced cooperation between the Public Investment Fund of Saudi Arabia and the Oman Investment Authority as well as United Arab Emirates partners.
