Oman’s government released a 2019 state budget on Tuesday that slows spending growth but may not cut a big deficit that has caused international rating agencies to downgrade its debt to junk status.

Spending this year is projected at OMR12.9bn ($33.5bn), up from OMR12.5bn in the original budget for 2018. That implies spending growth of about 3 per cent, compared to nearly 7 per cent in the 2018 budget.

Revenues are estimated at OMR10.1bn, assuming an average oil price of $58 per barrel this year; that would leave a 2019 budget deficit of OMR2.8bn, or 9 per cent of gross domestic product.

But Brent oil is currently around $54, so unless oil prices rise, Oman may find it hard to hit the deficit estimate.

In the first 10 months of 2018, when the Brent price was much higher and averaged $74, the government ran a deficit of OMR2.04bn, according to the latest data from the statistics agency.

The government said it would finance 86 per cent of this year’s deficit through local and foreign borrowing. It has also been covering its deficit by drawing down financial reserves, but those reserves are shrinking, Fitch Ratings noted last month as it downgraded Oman to junk.

S&P also rates Oman in junk territory. Moody’s Investors Service maintains an investment-grade rating, but it is only one notch above junk with a negative outlook, meaning there is a good chance of a downgrade.

Omani authorities are seeking to reduce the pressure by boosting non-oil revenues; a 5 per cent value-added tax may be introduced as soon as late this year. But the tax has been delayed by technical challenges and concern about damage to growth and investment, and oil prices will in any case remain the key factor for revenues.

S&P said in November that its rating of Oman was supported by the prospect of neighbouring countries providing similar aid if that were needed to avert a crisis.