MUSCAT: Oman took advantage of attractive interest rates and raised $6.5 billion in January, its biggest sale on record, to help bridge deficits. And Bahrain, the smallest of the GCC’s six nations, tapped the international bond markets for $3.6 billion in 2017. It may issue this year to help meet funding needs.
Junk-rated Oman and Bahrain have the weakest finances in the GCC and face making politically unpopular decisions such as freezing public sector employment and cut spending significantly, Bloomberg reported, adding that the countries have been slow to implement reforms compared with their richer neighbours such as Saudi Arabia and Abu Dhabi, which have slashed expenditure, rolled back some subsidies and introduced five per cent value added tax (VAT) on 1 January 2018.
The Sultanate has taken a number of steps to improve its finances, including: raising corporate tax to 15 per cent from 12 per cent; reducing tax exemptions; easing fuel, electricity subsidies; deferring non-essential projects; and imposing excise duties on certain products.
However, total expenditure in the 11 months through November 2017 is estimated to have climbed 8.5 per cent from the previous year to OMR 10.4 billion ($27 billion), according to the bond prospectus.
Selling debt has been critical to maintaining Bahrain’s reserves. The central bank’s foreign-currency holdings dropped to a 16-year low of $1.27 billion in July before recovering in September after it tapped the bond market for $3 billion. The nation last year asked Gulf allies for financial help, according to people with knowledge of the talks.
Bahrain implemented some measures to trim expenditure, mainly reducing subsidies and transfers, which lowered their contribution to total expenditure to about 25 per cent in 2017 from 29 per cent in 2014, S&P Global Ratings said in a December report.
While Bahrain has eased spending, imposed excise tax, and increased fuel prices, the changes have not been enough to stabilise its debt-to-GDP, Fitch said in a report this month after it downgraded Bahrain’s credit rating deeper into junk.
