Oman plans to make its first sovereign issue of Islamic bonds, a 200 million rial ($520 million) issue, by mid-2015 to help finance a budget deficit caused by the plunge of oil prices, the head of its central bank said on Sunday.
"The issue will be through the central bank for the local market," central bank executive president Hamood Sangour al-Zadjali told Reuters on the sidelines of a business conference in Abu Dhabi.
The issue would boost Oman's fledgling Islamic banking industry, giving it a pricing benchmark and a liquidity management tool. "We have Islamic banking units - they would like some liquidity invested in it," Zadjali said.
If oil stays low, Oman's state finances will face heavy pressure; its state budget plan this year envisages a deficit of 2.5 billion rials, equivalent to about 8 percent of the country's annual gross domestic product.
"We hope it (low oil prices) will be short-lived. The government will continue with its plan to invest and go for mega infrastructure projects," Zadjali said. The Omani government has not issued an international bond since 1997.
"In the second half we will decide whether to go or not to the international markets," Zadjali said, adding: "It is good to diversify the sources of funds, local bonds and international bonds, to attract investments from abroad."
To ease the pressure on government finances, Oman cut natural gas subsidies this year, doubling prices charged to some industrial users. More subsidy cuts are possible for other fuels, Zadjali said.
"We have cut gradually, but not in a large scale." Future cuts will also be gradual, and will avoid hurting low-income people, Zadjali added.
He said Oman's banking sector expected to see profits expand 10 percent in 2015, in line with growth last year; loan growth might be 10-12 percent, compared to 11 percent in 2014..
"2014 was a very good year for Oman's banks - we expect the same growth this year."For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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