OMAN: Quick thoughts ahead of sukuk issuance

GULF COUNTRIES - In Brief 07 Jun 2021 by Justin Alexander

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Oman is coming to market with a sukuk only four months after its unexpectedly large $3.25bn bond in January. We had expected that the sovereign would hold back until EDO had gone ahead with its inaugural issuance, of up to $5bn, which the Minister of Oil recently implied would come this month (because it will take over paying PDO oil costs from July). However, given that there seems to be a sweet spot at present, with low interest rates, high oil prices and healthy market demand, particularly for sukuk, the sovereign is going for an opportunistic issuance. It has already financed most of its likely budgetary needs for this year, but there is plenty of debt maturing in the next 18 months and so this is a sensible time to pre-finance. The prospectus shows some signs of being rushed, which suggests that this is indeed opportunistic. The timing may also be related to the IMF Article IV mission, which should have wound up today and may publish a close of mission statement here as soon as tonight, likely saying positive things about reform efforts (and in due course publishing the first Article IV report the authorities have permitted in many years).Basic fiscal data until April was released last week (see our 4 Jun weekly) showing a -$2.2bn deficit, although the monthly deficit will ease on average during the rest of the year as higher oil prices and production will start filtering through in May (there is a 3-month lag) and oil costs will go off budget when EDO takes over. We expect about a -$4.5bn deficit for the full year, less than the -$5.8bn budgeted (and -$10.9bn in 2020) because higher oil prices will more than offset some minor backsliding on reforms (residential e...