Oman has appointed a banks to help it raise funds through a sovereign bond as the sultanate looks to bridge its fiscal deficit amid lower oil revenues.

The government has selected Citi, HSBC, JP Morgan, Societe Generale and Standard Chartered to lead the transaction which is expected to be announced as early as this week, according to new agency Reuters, which cited unnamed sources.

Muscat could raise around $1bn or more through the sale. It had invited banks to pitch for advisory roles in first week of January and initially had guided that it could do either a dollar bond or raise funds through sale of sharia-compliant paper.

Oman’s debt plans follow Bahrain, which on 21 February launched a tap of up to $600m of its existing $1bn bond maturing in October 2028. Bank ABC, BNP Paribas, Credit Suisse, JP Morgan and Standard Chartered are the leads for Bahrain, which is rated BB- by Standard & Poor’s and BB+ by Fitch.

The sale of bonds by Oman and Bahrain is sign of financial distress among the Gulf states, which rely heavily on the sale of crude for revenues. The price of oil is still 50 per cent below mid-2014 prices.

Oman had sold $2.5bn worth of bonds in June 2015, its first such sale since 1997 and tapped the bonds for an additional $1.5bn later in September. It has also secured $1bn from the international loan market in January to help bolster its finances.

Oman could run a budget deficit of RO3bn ($7.8bn) in 2017, which is equivalent to 35 per cent of the government revenues and 12 per cent of the country’s GDP.

The expected deficit comes after a challenging 2016 for the Omani economy. The budgeted deficit for 2016 was RO3.3bn. The sultanate plans to fund 84 per cent or RO2.5bn of the projected deficit with external and domestic borrowing, the finance ministry said at the time of releasing budget.

External borrowing includes issuance of international bonds, Islamic bonds, and syndicated loans. The rest of the deficit, estimated to be nearly RO500m, will be covered by drawing on reserves.

The deal pipeline in the GCC also includes a bond by Bank of Sharjah, which is expected to issue a US dollar bond the end of this week, after it publishes 2016 financial results and obtains final approval of bond-related documentation, according to the report.