Fitch Ratings reports that Omani banks are facing a rise in non-performing loans, amid a slow economic recovery. For the continuing unrest caused by the outbreak of the Corona epidemic.
The agency confirmed in a report, today, Thursday, that the core credit features of the Sultanate's banks will face pressure over the course of 2021, and raise the non-performing loan ratio to 4.4%.
The report said: "Corporate loan delays are significant in the Sultanate, and if they do not extend their repayment, they will pose great risks to the quality of assets when they expire in September."
The report indicated that the total loan deferrals during the past year varied widely between banks at rates ranging between 6% to 50% of total loans, based on the principal of the outstanding loan and the related balances.
The expected credit losses of the Omani banking sector increased to 4.1% of total loans at the end of 2020, as banks benefited from the allocations, and the Sultanate's GDP contracted by 4.9% during 2020.
The report expected core profitability to improve modestly in 2021; Due to the gradual recovery in lending, but the slow economic recovery and the still high cost of risks limit the improvement.
The Omani government’s need for financing decreased during the current year compared to 2020, due to the recent recovery in oil prices and the imposition of a value-added tax to boost government revenues.
The tax was implemented in the Sultanate from April 16, in an attempt to boost government revenues and reduce the budget deficit exacerbated by the crisis.
Oman is a small oil producer, currently at levels not exceeding 900,000 barrels per day. Because of the commitment to the "OPEC +" agreement, which severely affected the government budget and pushed for the approval of a comprehensive economic reform plan.
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