MEED Oman conference told borrowing and privatisation on the agenda as the sultanate faces up to lower oil prices

Al Bustan Palace, Oman. 27 October 2014. The annual MEED Oman Projects conference was told today that lower oil prices will increase pressure for the government to borrow and privatise as it seeks to maintain investment in major infrastructure projects.

Oman’s budget this year is based on oil averaging $85 a barrel but last week spot prices fell below this level for the first time in more than five years.

Central Bank of Oman executive president Hamood al-Zadjali said the Omani economy is solid and that non-oil output was expanding. He said that possible borrowing next year, which might include a sovereign loan, a bond or a sukuk, would be limited and sustainable.

Speaking to Reuters in Kuwait on 26 October, Oman’s Minister Responsible for Financial Affairs Darwish bin Ismail al-Balushi said government subsidies might be cut. He was quoted as saying that the subsidy system was ineffective because it did not focus on poorer people.

Al-Balushi has previously said that gasoline subsidies are an obvious target for cuts.

On possible borrowing, Al-Balushi  was reported as saying that the government’s priority was to float sukuk on the domestic market. Bankers say that this might be worth $300 million-400 million. An international bond issue then follow later in 2015, bankers add.

Capital Market Authority (CMA) chief executive officer Abdullah al-Salemi told the conference that the government should consider privatising government companies through public share offerings.

Chief executive officer of the Oman Power & Water Procurement Company Ahmed al-Jahdahmi said that electricity demand could rise by as much as 8 per cent a year to more than 6,000MW in 2020 unless there were effective demand management measures.

Oman Development Bank is SME financial partner. AECOM is bronze sponsor. Drake & Scull International and Hill International are conference sponsors. Al Madina Insurance, Acciona and EHAF are exhibiting. Rotary Engineering is lanyard sponsor. Networking sponsors are Galfar and Sarooj.