The next Omani sultan will face an economic crisis

Significance

The ratings agency said the change reflected the erosion of Oman’s foreign reserves in a context of low oil prices. Fears are rising over the country's longer-term economic future, as structural problems -- such as limited oil reserves and poor progress with diversification and fiscal reform -- intersect with political uncertainties over the succession process.

Impacts

• Oman will seek new investments and loans from China -- a principal importer of Omani oil.
• Large deposits by neighbouring countries in Oman’s central bank could threaten financial stability if suddenly withdrawn.
• The external Oman Investment Fund may absorb the State General Reserve Fund, on which the government has drawn down heavily.