Oman: Poised for Takeoff

What happened: A measured 2026 state budget, a new trade deal with India and plans for an international financial zone are among the latest encouraging pro-business signals from Oman.

Why it matters: On the ground, there is increased evidence of Omani economic confidence, ambition and flexibility.

What happens next: Officials will seek large foreign investment deals to signal that a new era has arrived, with numerous opportunities across oil and gas, renewables, and adjacent sectors.

In recent weeks, there have been a number of significant signals that Oman, from a macroeconomic perspective, has put in place a business environment that is attractive for foreign direct investors, and that Omani officials and businesses are aggressively seeking new projects.

The Annual State Budget Looks Positive

The State Budget 2026, published 1 January as the first Royal Decree of the year, reflects steady progress achieved in 2025. After just managing to avoid a sovereign default in 2020, Oman notched fiscal surpluses in 2022, 2023 and 2024.

In 2025, the deficit of $1.24bn was smaller than budgeted for and well within the capital investment allocation. A key objective while oil reserves are probably at peak, but gas reserves are now declining, the share of the government’s non-hydrocarbons revenue rose from 28% in 2024 to 33% last year, continuing a multi-year upward trend.

The budget assumes an oil price of $60/bbl, and the government plans on a further budget deficit decline in 2026, such that a large measure of contingency is built into the financial plan.

International Authorities Agree

The success of tight fiscal discipline and planning has been reflected in a positive IMF Article IV visit report published in December, and also by the World Bank’s 2025 decision to open an office in Muscat.

Speaking recently to Horizon Engage, a Western ambassador in Muscat attributed that decision to a desire to capture lessons learned for the benefit of other regional governments who have been less bold (and less successful) for fear of creating social instability. The ambassador also considers Oman’s Vision 2040 strategic plan to have been the most successful in the Gulf. Omani officials credit the program’s success to it being built bottom-up with citizens’ buy-in, whereas neighbors’ strategic plans were developed top-down by consultants who did not bear responsibility for implementation. Oman is now back to investment grade with ratings agencies.

The ambassador also pointed to Oman’s passage of its FATF money-laundering peer review in 2025 without receiving any observations as another area of contrast to, for example, the UAE. International payments are cleared through Standard Chartered, who have tight transaction vetting systems, having previously been under monitoring by the US Treasury. Iranian transactions in particular are rigorously controlled.

Further Indicators of Macroeconomic Improvements

On 18 December, Minister of Commerce, Industry and Investment Promotion Qais bin Mohammed Al Yousef (see Featured Personality) signed a Comprehensive Economic Partnership Agreement (CEPA) with India. The CEPA gives Indian goods zero-duty access on about 98% of Omani tariff lines while India has liberalized tariffs on most Omani imports. India has been reluctant to sign such deals, so the CEPA presents advantageous access to the Indian market for Omani-produced goods, but also sets the scene for greater mutual exchanges to balance off trade with China.

Last week, Finance Minister Sultan bin Salim Al Habsi announced that Oman will soon establish an international financial zone, with its own legal and courts system — replicating the constitution of the Dubai International Financial Centre. This will give foreign investors added certainty.

Reflecting the positive macroeconomic signals and investor confidence, several foreign investment deals are in the offing. Senior contacts at the Energy Ministry recently revealed that the 3rd Green Hydrogen Auction round has attracted over 100 bids, and three winners will be announced in Q2, with each being allocated a 10-km2 green energy generation plot.

Two green steel production deals are being negotiated, along with a plan for potash production using green energy. An agreement has already been signed with Waaree Solar Americas for a polysilicon manufacturing plant, with output for solar panel manufacturers in Oman, India and the US.

In sum, these developments reflect Omani authorities’ continued success in promoting pro-business, FDI-friendly policies. Officials may soon be on the hunt for big-ticket deals to signal a new era. Meanwhile, the dividends are already beginning to materialize. GDP growth in 2025 was a solid 2.9% and is expected to grow to 4.0% in 2026.