Standard and Poor’s cited Oman’s lack of monetary flexibility due of its pegged US Dollar exchange rate, as well as the deterioration in its fiscal position due to a falling oil price as reasons for the change in outlook.
Oman had been expected to issue local currency 200 million rials ($520 million) worth of Sukuk in early 2015 in what would be the nations Sovereign Sukuk debut. In November 2013, Omani real estate developer Tilal Development Co sold 50 million rials of sukuk, the country’s first and only corporate sukuk issue.
Little Impact to Expected Sukuk Debut
The downgrading is unlikely to affect Oman’s anticipated debut Sukuk in 2015 as the Sultanate still enjoys a respectable A/A-1 credit rating which was re-affirmed by Standard and Poor’s, and recent issuances by Turkey and Pakistan, both of whom are rated lower were both significantly over-subscribed illustrated demand still outstrips supply in the primary Sukuk market.
Furthermore Oman’s two domestic full-fledged Islamic banks, Bank Nizwa and Alizz Islamic Bank, as well as several Islamic windows at conventional banks, including Bank Sohar, Bank Dhofar, Bank Muscat, Ahli Bank and National Bank of Oman are likely to soak up much of the demand for any local currency issuance.