The Oman government is planning to float OMR200m ($520m) worth of sovereign sukuk in the domestic market this year partly to meet the projected budget deficit, it was reported.
The total projected deficit in 2014 budget is OMR1.8bn ($4.68bn) , which will be met by way of OMR200m foreign borrowing, OMR200m sukuk, a surplus of OMR1bn from 2012 and another OMR400m financial reserve, the Times of Oman said.
Darwish bin Ismail Al Balushi, minister responsible for financial affairs, said that by issuing the sukuk the government was trying to absorb the liquidity available at two Islamic banks as well as the “window operations” of conventional banks.
The Central Bank of Oman last year gave some relaxation for Islamic banks to deploy their excess funds in overseas markets for a certain period, until Sharia-compliant products were available within the domestic market.
It followed a request from the banks to park their funds in short-term instruments to effectively use their excess liquidity, the Times report said.
Al Balushi said that borrowing from overseas banks was not needed to fund government projects.
"We can borrow from [the] local market to meet short-term requirements, while external borrowings are for meeting long-term requirements," Al Balushi said.
"Our general debt is OMR1.6bn and it is low when compared with the country's GDP. It all depends on the size of the economy and the ability of the government to repay the debt. We are still in safe limits.”