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FINANCING DEFICIT

Oman looking to finance deficit caused by low oil prices

Oman to borrow $5bn-$10bn from abroad

MUSCAT, February 8, 2016

Oman plans to borrow between $5 billion and $10 billion from abroad to help finance a budget deficit caused by low oil prices, central bank executive president Hamood Sangour al-Zadjali told Al Arabiya television on Monday.

Zadjali said the government might issue eurobonds by the middle of this year, but did not comment on the size of any eurobond offer or give further details of the foreign borrowing plan.

He also said the government planned to issue OMR600 million ($1.56 billion) of domestic bonds this year, or about OMR100 million ($258.5 million) every two months. It is currently marketing a OMR100 million ($258.5 million), five-year issue with a coupon of 3.5 per cent; the bonds will be auctioned on February 16.

The borrowing plans underline the heavy financial pressure which Oman faces because of cheap oil; the government has not issued an international bond since 1997. Last month, Oman obtained a $1 billion sovereign loan from international banks.

Financial Affairs Minister Darwish al-Balushi said in January that the government planned to cut its budget deficit to OMR3.3 billion ($8.5 billion) this year from an actual OMR4.5 billion ($11.6 billion) last year, partly through big spending cuts.

The government has decided to borrow abroad to reduce pressure on the local banking system, where money market rates have been rising as inflows of new oil revenues decrease.

A central bank auction of 91-day Treasury bills in late January fetched a weighted average yield of 0.844 percent, up from 0.201 per cent at a similar sale in March last year.

Arabiya quoted Zadjali as saying the central bank's foreign reserves were sufficient to cover about four months of imports. Its foreign assets and gold totalled OMR7.09 billion ($18.3 billion) in November, up 8.3 percent from a year earlier, the latest official data shows.

In addition, Omani sovereign wealth funds are believed to have about $20 billion of assets, much of them held overseas, which could be sold to obtain foreign exchange if needed. - Reuters




Tags: Oman | Bank | Funding | central |

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