Oman is expected to issue OMR500 million ($1.3 billion) worth of conventional and Islamic sovereign debt early next year, and aims to choose the arranging banks in October, said the head of the country’s first full-fledged Islamic bank.
Last month, the finance ministry received applications from banks to arrange the issuance, with plans to raise OMR300 million via conventional bonds and OMR200 million with sukuk, said Jamil Al Jaroudi, chief executive of Bank Nizwa.
“We expect it to be in the market in the first quarter of 2015,” Jaroudi told Reuters on the sidelines of the Global Islamic Finance Forum.
The issuance would be in local currency and would apparently be separate from an international, U.S. dollar-denominated sovereign bond issue which Oman has said it may conduct.
The government currently issues little debt beyond domestic issues of development bonds worth around 100 million rials. But government spending has been rising sharply in the last few years, increasing pressure on the government to develop its presence in the debt markets.
The sovereign sukuk would be the government’s first issue of Islamic bonds, and would be welcomed by the sultanate’s nascent Islamic finance industry, which currently has access to only a small number of sharia-compliant investment products.
Oman began to introduce Islamic finance in 2012, becoming the last of the six Gulf Cooperation Council states to do so, and its Islamic capital market is undeveloped. The central bank has said it will wait for a sovereign sukuk issue before developing its own set of sharia-compliant money market tools.
“When we started as an Islamic bank we didn’t have a place to put our money before deploying it as capital. Until now we don’t have a sovereign instrument tool to manage” interbank funding needs, Jaroudi said.
Last November, Omani real estate developer Tilal Development Co sold OMR50 million of sukuk, the country’s first and only corporate sukuk issue.
In May this year, the Islamic unit of Bank Muscat, Oman’s largest lender, said it planned to issue as much as $300 million worth of sukuk, pending regulatory approval.
Oman has two full-fledged Islamic banks, Bank Nizwa and Alizz Islamic Bank, as well as several Islamic windows at conventional banks, including Bank Sohar, Bank Dhofar, Bank Muscat, Ahli Bank and National Bank of Oman.