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For the first time in 20 years, Oman has sold international bonds in order to stop the effects of a crippling budget deficit caused by the low price of crude oil.
The government raised US$2.5 billion - $1 billion worth of five-year notes at a coupon rate of 3.625 percent and US$1.5 billion worth of 10-year bonds at 4.75 percent - according to a person familiar with the matter cited by Gulf Times.
In April, Oman chose five banks - Citi, JP Morgan, Mitsubishi UFJ Securities, Natixis and National Bank of Abu Dhabi - to organize the sale. Analysts had said a goal date set in the second quarter on 2016 would not be achievable due to the timing of the holy month of Ramadan and the amount of work required for a successful bond sale campaign.
Oman is the largest oil producing Arab country that does not participate in Saudi-led OPEC.
Several other countries have used the bond market to pay for budget shortfalls that have accumulated in weight over the past few years.
Qatar, the world’s biggest provider of liquefied natural gas, raised $9 billion during a bond sale last month, which amounted to the Middle East’s largest-ever bond issue. The United Arab Emirates raised $5 billion in April through similar means.
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Saudi Arabia will sell $15 billion in international debt later this year, which would be the largest sale of its kind by a developing country.
In 2016, Oman’s budget deficit is expected to shrink to 19.7 percent of gross domestic product from 20.4 percent in 2015, according to estimates calculated by the International Monetary Fund.
Oil and gas ventures contribute to 85 percent of the monarchy’s revenues, according to The Wall Street Journal.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…