Reforms ‘key to easing Oman debt’

S&P last month cut its outlook on Oman to negative from stable, saying the country’s fiscal and external buffers will continue to erode in the absence of substantial fiscal measures to curtail the government deficit. (AFP)
Updated 01 May 2019
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Reforms ‘key to easing Oman debt’

  • Oman’s state coffers have been hit by a slump in oil prices over the past few years and the country has increasingly relied on external borrowing
  • S&P Global Ratings estimates Oman’s debt to have increased to 49 percent of GDP in 2018 from less than 5 percent in 2014, and it expects it will rise to about 64 percent by 2022

ABU DHABI: Oman needs fiscal consolidation and better public expenditure alongside implementing reforms to mitigate its growing debt, the regional head of the World Bank said on Wednesday.
Oman’s state coffers have been hit by a slump in oil prices over the past few years and the country has increasingly relied on external borrowing to levels that have created concerns among investors and pushed its credit rating into junk status.
S&P Global Ratings estimates Oman’s debt to have increased to 49 percent of GDP in 2018 from less than 5 percent in 2014, and it expects it will rise to about 64 percent by 2022.
“There is concern about the growing debt,” Issam Abousleiman, the World Bank’s regional director for Gulf Cooperation Council (GCC) countries, said.
“Debt has grown very fast, this is one area (to which) they need to pay special attention.
“Fiscal consolidation and improving public expenditure will be key ... these two are important and broader reforms will be highly beneficial,” he said.
Higher oil and gas prices in recent months have helped Oman and if the country presses ahead with its economic diversification and reforms, its position should improve, he said.
Oman’s economy will see growth slowing to 1.2 percent in 2019 as the sultanate’s commitment to the December 2018 OPEC+ output cut constrains oil production, a report released by the World Bank on Wednesday said.
S&P last month cut its outlook on Oman to negative from stable, saying the country’s fiscal and external buffers will continue to erode in the absence of substantial fiscal measures to curtail the government deficit.
For 2019, the oil producer has projected a budget deficit of 2.8 billion Omani rials ($7.3 billion) or 9 percent of gross domestic product, assuming an average oil price of $58 per barrel.
Growth in the GCC in 2019 is projected to be similar to 2018 at 2.1 percent before accelerating to 3.2 percent in 2020 and stabilizing at 2.7 percent in 2021, the report said.
Saudi Arabia, the largest Gulf economy, is expected to see growth moderating to 1.7 percent in 2019 as higher government spending offsets the impact of oil production cuts implemented in the first half of 2019.
The Kingdom can reduce its fiscal deficit through efficient expenditure management, Abousleiman said.
Saudi Arabia has forecast a fiscal deficit of 4.2 percent of GDP for 2019, down from an estimated 4.6 percent of GDP in 2018.


US eases restrictions on China’s Huawei to keep networks, phones operating

Updated 21 May 2019
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US eases restrictions on China’s Huawei to keep networks, phones operating

  • The company is still prohibited from buying American parts and components to manufacture new products without license approvals
  • Out of $70 billion Huawei spent buying components in 2018, some $11 billion went to US firms
WASHINGTON: The US government on Monday temporarily eased some trade restrictions imposed last week on China’s Huawei, a move that sought to minimize disruption for the telecom company’s customers around the world.
The US Commerce Department will allow Huawei Technologies Co. Ltd. to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei handsets.
The company is still prohibited from buying American parts and components to manufacture new products without license approvals that likely will be denied.
The US government said it imposed the restrictions because of Huawei’s involvement in activities contrary to national security or foreign policy interests.
The new authorization is intended to give telecommunications operators that rely on Huawei equipment time to make other arrangements, US Secretary of Commerce Wilbur Ross said in a statement.
“In short, this license will allow operations to continue for existing Huawei mobile phone users and rural broadband networks,” Ross added.
The license, which is in effect until Aug. 19, suggests changes to Huawei’s supply chain may have immediate, far-reaching and unintended consequences for its customers.
“The goal seems to be to prevent Internet, computer and cell phone systems from crashing,” said Washington lawyer Kevin Wolf, a former Commerce Department official. “This is not a capitulation. This is housekeeping.”
Huawei, the world’s largest telecommunications equipment maker, declined to comment.
The Commerce Department said it will evaluate whether to extend the exemptions beyond 90 days.
On Thursday, the US Commerce Department added Huawei and 68 entities to an export blacklist that makes it nearly impossible for the Chinese company to purchase goods made in the United States.
The government tied Huawei’s addition to the “entity list” to a pending case accusing the company of engaging in bank fraud to obtain embargoed US goods and services in Iran and move money out of the country via the international banking system. Huawei has pleaded not guilty.
Reuters reported Friday that the department was considering a temporary easing, citing a government spokeswoman.
The temporary license also allows disclosures of security vulnerabilities and for Huawei to engage in the development of standards for future 5G networks.
Reuters reported Sunday that Alphabet Inc’s Google suspended business with Huawei that requires the transfer of hardware, software and technical services except those publicly available via open source licensing, citing a source familiar with the matter.
Google did not immediately respond to a request for comment on the new authorization.
Out of $70 billion Huawei spent buying components in 2018, some $11 billion went to US firms including Qualcomm Inc. , Intel Corp. and Micron Technology Inc.
“I think this is a reality check,” said Washington trade lawyer Douglas Jacobson. “It shows how pervasive Huawei goods and technology are around the globe and if the US imposes restrictions, that has impacts.”
Jacobson said the effort to keep existing networks operating appeared aimed at telecom providers in Europe and other countries where Huawei equipment is pervasive.
The move also could assist mobile service providers in thinly populated areas of the United States, such as Wyoming and eastern Oregon, that purchased network equipment from Huawei in recent years.
John Neuffer, the president of the Semiconductor Industry Association, which represents US chipmakers and designers, said in a statement that the association wants the government would ease the restrictions further.
“We hope to work with the administration to broaden the scope of the license,” he said, so that it advances US security goals but does not undermine the industry’s ability to compete globally and remain technology leaders.
A report on Monday on the potential impact of stringent export controls on technologies found that US firms could lose up to $56.3 billion in export sales over five years.
The report, from the Information Technology & Innovation Foundation, said the missed opportunities threatened as many as 74,000 jobs.
Wolf, the former Commerce official, said the Huawei reprieve was similar to action taken by the department in July to prevent systems from crashing after the US banned China’s ZTE Corp, a smaller Huawei rival, from buying American-made components in April.
The US trade ban on ZTE wreaked havoc at wireless carriers in Europe and South Asia, sources told Reuters at the time.
The ban on ZTE was lifted July 13 after the company struck an agreement with the Commerce Department that included a $1 billion fine plus $400 million in escrow and replacement of its board of directors and senior management. ZTE, which had ceased major operations as a result of the ban, then resumed business.
(Reporting by Karen Freifeld in New York and David Shepardson in Washington; Additional reporting by Diane Bartz in Washington and Angela Moon; Editing by Lisa Shumaker and Cynthia Osterman)