'Muscat's finances are in very good shape compared with other BBB- and even A-rated sovereigns, with net assets set to rise to 28.1 per cent of GDP [gross domestic product] by the end of 2004 and 30 per cent in 2005,' says Luc Marchand, credit analyst at S&P. 'The government is making good progress in dealing with the anticipated continued decline in oil output through the development of gas-related industries centred around the ports and using state-of-the-art technology. The privatisation programme has also been successful, and the banking sector will be strengthened by the merger of Bank Muscatwith National Bank of Oman.'

S&P raised the possibility of a further upgrade if the domestic tax base is strengthened, if enhanced oil recovery (EOR) projects pay off and if efforts to develop the tourism sector are successful. Oman is rated Baa2 by Moody's Investors Serviceand BBB by Capital Intelligencebut is not rated by Fitch Ratings.