Oman’s privatisation of electric companies to have ‘modest’ impact on fiscal deficit

38 Views | October 28, 2018 10:54 pm | Comments |
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The Omani government’s plans to privatise two state-owned electricity companies will have only a “modest” positive impact on fiscal deficit, but signal a shift towards more open investment policies and diversification, according to a new report from Fitch Solutions.

Recently, Oman’s government controlled Nama Holding announced plans for a partial sale of the Oman Electricity Transmission Company (OETC) and Muscat Electricity Company (MEDC) in 2019. The sales will be open foreign investors.

According to Fitch, “the decision to invite foreign investors thus underlines a broader drive by the government, accelerated since the oil price slump that began in 2014, to diversify the economy away from hydrocarbons production.”

“This strategy…rests, in turns, on attracting greater flows of foreign direct investment,” the report added.

The report also notes that the sales form part of a larger plan to collect a cumulative $1.8 billion from privatisations between 2017 and 2022,

which Fitch said is equivalent to 5 percent of non-oil revenues per year, and about 1 percent of total revenues.

Fitch estimated that the government’s fiscal deficit is 7.9 percent of GDP in 2018, compared to 6 percent in 2019.

Combined, OETC and MEDC have combined assets worth approximately $3.2 billion.

“While the exact amount earned from the sales will depend on investor appetite – which in turn will depend on factors like global financing costs and proposed dividends – the fiscal revenue gains look set to prove relatively modest,” the report notes.

Lastly, Fitch noted that the Omani government has made “good progress” in attracting foreign direct investment, as shown by the $13 billion urban development project in Muscat signed with UAE-based Majid Al Futtaim.

Source : Arabian Business | Photo credit : Google
39 Views | October 28, 2018 10:54 pm | Comments |
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