DUBAI, Jan 20 (Reuters) - Oman is in talks with regional banks to refinance a $2.2 billion loan it took out early last year, seeking to increase its size to between $3 billion and $4 billion, two sources familiar with the matter said. The loan taken out in February last year has a 15-month tenor with a one-year extension option at the borrower"s discretion, two other sources said previously. Oman was originally seeking up to $1 billion with last year"s loan but more than doubled its size due to strong appetite from banks. Despite the extension option, Oman is trying to refinance the loan with better terms. Pricing talk for the refinancing is around 350 basis points over LIBOR, one of the sources with knowledge of the matter said. The original loan"s all-in pricing, including fees, was between 375 and 390 basis points over LIBOR. Oman"s finance ministry did not immediately respond to a request for comment. Oman expects its budget deficit this year to reach 5% of gross domestic product (GDP), well within the limits of a medium-term fiscal plan it launched in 2020 to fix its heavily-indebted finances. The country may still need to tap international debt markets to fill its funding needs this year, other sources have said. The small Gulf crude producer expects public debt to reach 75% of GDP in 2022, which would be below previous estimates of an 86% debt-to-GDP ratio. Fitch last month revised Oman"s outlook to "stable" from "negative" as higher oil prices and fiscal reforms improve its balance sheet. In October, Moody"s did the same and S&P revised its outlook to "positive" from "stable".