Oman’s government has approved the 2016 General Budget with a deficit of 3.3 billion riyals. Darwish Al Balushi, the Minister Responsible for Financial Affairs, said that the total revenues for 2016 are estimated to 8.6 billion riyals, while expenditure is estimated to 11.9 riyals in 2016. Al Balushi told Oman News Agency that the Omani government posted a budget deficit of 4.5 billion riyals in 2015.
The Government plans to cut subsidy spending by almost two thirds this year to help tackle a budget deficit caused by low oil prices, the finance ministry said on Saturday. Subsidies on utility bills, housing loans, fuel and other goods are seen at 400 million rials ($1.0 billion) this year, down from 1.11 billion rials in 2015, the ministry said in a statement on the 2016 budget carried by the official ONA news agency.
Earlier this week, Oman’s cabinet approved fuel subsidy reforms as well as spending cuts and tax rises to bring the deficit under control. Oman has long provided lavish welfare benefits to its citizens, but like other Gulf countries, it is being forced by shrunken oil revenues to scale those back. The government forecasts a deficit of 3.3 billion rials or 13 percent of gross domestic product (GDP) this year, down from a deficit of 4.5 billion rials for 2015.
It plans to cover the gap with 1.5 billion rials worth of reserves, 900 million rials in borrowing from the international market, 600 million rials of grants, and 300 million rials of borrowing from the local market, the ministry said. That would mark a big reduction in domestic borrowing. Last year, 47 percent of the deficit was covered by borrowing from the local market, and 53 percent by state reserves.
Heavy government bond issues have been pushing up market interest rates in Oman and threatening to crowd out borrowing by the private sector. Officials have said Oman may issue its first international bonds since 1997 this year. The ministry did not elaborate on the source of the grants, but the country’s rich neighbours promised in 2011 to give it $10 billion in aid over 10 years.
Total state spending is projected at 11.9 billion rials this year, down 11 percent from actual spending last year. The government plans to cut current expenditure — routine spending on wages and materials — by 12 percent to 4.6 billion rials. Total revenues are projected at 8.6 billion rials, down 4 percent from last year’s actual revenues; 72 percent are expected to come from oil and gas.
The government has said it will also privatise companies to raise money and develop the private sector. The ministry did not give further details but said the matter would be included in the government’s new five-year economic plan for 2016-2020.
The Budget has proposed to amend the local prices of fuel to make such prices conform to the global prices, to suspend expansion of organisational structures at the ministries and government units, to postpone the award and execution of unnecessary or unimportant projects, to cancel family cars and tour vehicles allocated for ministers, undersecretaries and senior officials.
The Budget also proposed to cancel allocation of government vehicles for some positions and instead pay conveyance allowance determined as per the approved regulations, to prohibit the use of government cars after office hours and to review the fleet of vehicles of each government unit in light of the actual need and to return the extra vehicles to the Ministry of Finance.
Other austerity measures for cutting expenditure include using Oman Post for correspondence between various ministries and their affiliated offices and to cancel all cars and administrative expenses associated with it, to intensify the use of e-mail between the departments and divisions of the government, directorates with their branches and to minimise paper work among departments, to transfer some government services to the private sector by way of tenders, to limit days of travel, to limit overseas training unless it is necessary and justified and to pay employees tickets rather than encashment when such employee is on official tour abroad.
Also, the state budget proposed to limit the expenses incurred on entertainment and hospitality at the ministries and various departments along with the administrative expenses and other unnecessary expenses, to take actions for saving electricity consumption by switching off lights and air-conditioners in administrative offices and other buildings of the ministries and departments, to award the maintenance and minor repair works to private firms and to reduce the administrative jobs.
According to the ministry statement, the total actual revenue is expected at OMR8.9 billion, a fall of 23 per cent from the initial budget estimate. The reduction was due to a fall in oil prices witnessed last year. The total spending is expected to reach OMR13.4 billion compared to OMR14.1 billion in the budget estimates. This was due to a reduction in spending as per the measures taken at the beginning of the year in order to face the low oil revenues.
The actual deficit for the fiscal year 2015 was around OMR4.5 billion according to the initial calculations, which is showing an increase of 80 per cent against the deficit expected in the budget. The increase in deficit is attributed to a fall in oil prices.
The Budget also proposed that pprivatisation or disinvestment of government-owned companies will be implemented in line with a programme prepared for 2016-2020 period. The state-owned firms for divestment will be identified on completion of the study by a consultant, which is currently under way. The programme is aimed at expanding the participation of private sector in acquisition, finance and management of projects.