Oman reports large fiscal surplus in Q1

Strong crude prices along with higher oil production allowed Oman to record a large budget surplus in the first quarter of 2010 despite an increase in investments and other expenditures, official data showed yesterday.

Spending during January-March stood at RO1.574 billion (Dh15.04bn) and revenue at RO1.996bn, creating a surplus of RO421.2 million, the Omani Ministry of Economy said in its April bulletin.

The surplus is compared to a deficit of about RO16.6m in the first quarter of 2009, according to the report.

A breakdown showed the surplus was achieved as a result of a sharp rise in the Gulf country's oil revenues, which more than doubled to RO1.425bn in the first quarter of this year from nearly RO709.2 million in the first quarter of 2009.

Gas revenue edged up by about 2.2 per cent to RO219m from RO215m, while customs revenue surged by about 26 per cent. By contrast, the report showed a 51.7 per cent plunge in corporate income tax and a decline of about 30.5 per cent in capital revenues.

Total revenue shot up by nearly 47.9 per cent from their level of about RO1.349bn in the first quarter of 2009.

The report showed higher revenue encouraged the government to pursue its stated expansionary fiscal policy triggered by the 2008 global financial crisis. Actual expenditure swelled by nearly 15.3 per cent in the first quarter of 2010 from its level of RO1.366bn in the first quarter of 2009. Investment spending increased by about 10.4 per cent to RO474.1m from RO429m in the same period.

There was an increase in other expenditures, including current spending, involving salaries to civil servants, government purchases and other items, defence and national security, and civil ministries.

The report showed investment spending in the first quarter of 2010 included around RO146.7m for oil production and RO56.6m for gas.

In contrast, with most Arab oil producers, Oman has increased its crude output over the past months as it is not a member of the 12-nation Organisation of Petroleum Exporting Countries (Opec).

The report showed it pumped nearly 855,000 barrels per day in the first quarter of 2010, around 8.7 per cent above its production of about 786,000 in the first quarter of 2009.

The price of Oman's crude also shot up by 70 per cent to an average $76.6 a barrel in the first quarter of 2010 from $44.9 in the same period last year.

During 2009, Oman recorded an actual fiscal deficit of about RO128.3m, far below the projected shortfall of RO810m. The decline was mainly because of lower actual spending compared with the previous year and higher than expected earnings as the country based its budget on an oil price of around $45 while prices averaged nearly $60 through the year.

Despite the surge in oil output last year, Oman's hydrocarbon sector plunged by 38 per cent because of a sharp fall in prices. This depressed the overall nominal gross domestic product by 27.4 per cent to RO17.731bn last year from RO23.185bn in 2008.

A breakdown showed most sectors recorded a decline in current prices, with non-oil GDP shrinking by nearly 7.3 per cent.

But in real terms, the country's GDP grew by about 3.7 per cent through 2009 mainly due to higher crude output and expansion in non-oil sectors.

The 2010 budget, which was announced early this year, is based on a more optimistic oil price of $50 a barrel compared with $45 in 2009.

Spending was projected at a record RO7.180bn, nearly nine per cent above the 2009 budget, while revenues were assumed at RO6.380bn, leaving a deficit of RO800m.

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