Oman’s extensive offshore financial assets, in addition to the central bank’s foreign exchange reserves (the combination of which amount to roughly 75% of GDP) will enable it to provide fiscal stimulus and fund projected deficits without resorting to debt accumulation, at least over the short to medium term, according to Moodys Investors Service’s latest annual credit report on the country. Oman, the economy of which relies heavily on oil and gas exports, thus retained its A2 investment-grade sovereign rating despite a collapse in world oil prices since July 2008, and dour growth prospects predicted for the current year.

One additional challenge facing Oman is its use of enhanced albeit expensive oil recovery techniques, which analysts note pushes up the cost of production. The average cost of pumping oil in Oman rose from around $8/barrel in 2005 to $16/barrel in 2008, and is likely to climb further over the medium term, commented Tristan Cooper, a Moodys Vice-President and Senior Analyst.

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