Oman sets up sustainable finance framework in green push

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Oman plans to finance “specific” environmental and social projects under a new sustainable finance framework published on Wednesday to help the Sultanate reduce its heavy reliance on fossil fuels and attract sustainable investments.

“The sustainable finance framework sets out how the Oman government intends to allocate financing towards specific environmental and social areas to mitigate the impacts of climate change, promote socioeconomic development and ensure a just transition to a low carbon economy,” the Ministry of Finance said in the report detailing out the framework.

The government plans to issue sustainable finance instruments such as green, social and sustainability bonds as well as loans and sukuk – Islamic bonds – whose proceeds will be used to fund and re-finance renewable energy projects.

The sustainable finance instruments will be issued in any currency or tenor and with other terms and conditions including covenants to reflect the financing strategy and plan of the Sultanate.

Moody’s assigned an SQS2 sustainability quality score to Oman’s sustainable finance framework while noting that the “issuer has established its use-of-proceeds framework to finance projects across 14 eligible categories, of which seven are green and seven are social.”

Though the eligible categories are coherent with Oman’s national strategy to reach net zero by 2050, Moody’s said oil- and gas-related investments are unlikely to decrease in the near term.

Oman committed to net-zero emissions by 2050 two years ago in line with the Gulf state’s broader efforts to mitigate the impact of climate change.

Oman’s transition to green economy

Meanwhile, Oman’s Vision 2040, an economic development plan launched in 2021, envisions the country cutting oil’s share of gross domestic product (GDP) to 16 per cent in 2030 and 8.4 per cent in 2040, down from 39 per cent in 2017.

The Ministry of Finance said the Sultanate appreciates the potential of renewable energy technologies as power supply and fossil-fuel reserves come under pressure from population growth and rapid industrial development.

Oman said its commitment to cut carbon emissions is part of the country’s broader economic diversification strategy.

The shift to renewable energy sources is expected to promote the Sultanate’s energy security and the government in Muscat also aims to invest in eco-tourism, cultural preservation, and responsible hospitality.

The International Monetary Fund said Oman’s economic recovery is continuing and growth is expected to rebound in 2024 on the back of higher hydrocarbon production and stronger non-hydrocarbon growth.

Read: Oman heads into 2024 with projected budget deficit