A sharp rise in oil export earnings depressed Oman’s fiscal deficit by more than 92 per cent in 2010 despite a large increase in public spending as part of the Gulf country’s post-crisis fiscal expansion measures.
According to official data, Oman, which is not a member of the 12-nation Opec, had reported a massive surplus in the first half of 2010 before it turned into a shortfall due to overspending and transfer of part of the oil revenue to the state reserve fund. From around RO680.3 million in 2009, the budget deficit tumbled to nearly RO48.4m in 2010, a decline of 92.9 per cent, the ministry of national economy said in its latest monthly report.
A budget breakdown showed spending swelled to around RO7.963 billion in the 2010 from RO7.428bn in 2009. The bulk of the increase was in current spending which grew by about 13.6 per cent to RO4.790bn from RO4.218bn. Capital expenditure shrank by around 3.5 per cent to RO2.586 billion from RO2.690bn.
The increase in capital spending was mostly in allocations for civil ministries development as investment in oil and gas production fell by 11.9 and 20.4 per cent respectively, the report showed. The increase in spending was more than offset by a 17.3 per cent growth in revenue to RO7.915 billion in 2010 from nearly RO6.748bn in 2009.
Net oil export earnings, after transfers to the state reserve fund, jumped by about 21.8 per cent to RO5.470bn from RO4.490bn.
Gas revenue surged by 27.2 per cent to RO929.9m from RO731.3m. The surge in oil exports was a result of nearly $20 increase in oil prices and a large rise in Oman’s crude output as the country is pushing ahead with an ambitious programme to reverse a fall in its oil production in previous years due to lower investment and a focus on gas field development. Oman’s oil output soared above 870,000 barrels per day in 2010 from around 806,000 bpd in 2009. Last year’s output was the highest in nearly eight years. Higher expenditure allied with a surge in oil production and prices to boost Oman’s GDP by nearly 23.3 per cent in current prices to RO22,201million in 2010 from around RO17,999 million in 2009.
The report showed the oil sector shot up by around 42.5 per cent last year while there was growth of 29 per cent in the gas sector, and 11.9 per cent in the manufacturing sector. All other sectors also recorded positive growth. Oman has just endorsed a new five-year development plan that aims to achieve real GDP growth of three per cent annually and keep inflation under control.
Sultan Qaboos bin Saeed ratified the eighth plan at the start of 2011 to kick off one of the Gulf country’s largest development schemes targeting massive investments and intensification of plans to diversity its oil-reliant economy.
The Sultan also endorsed the 2011 budget, which forecast spending at a record high RO8.13 billion and revenue at RO7.28 billion, leaving a deficit of RO850 million, nearly four per cent of the estimated 2011 GDP.
“The plan aims to achieve minimum real GDP growth of three per cent a year and ensures inflation will remain at low levels….it will focus on stronger coordination between monetary and fiscal policies to achieve economic stability and on continuation of projects under way with an emphasis on new ventures,” Oman’s official media said in March.
“The plan will also pursue diversification efforts and a drive to expand the country’s oil and gas production and increase hydrocarbon reserves.”
The newspapers, citing a government statement said the 2011 budget was nearly nine per cent higher than the 2010 budget, adding that this year’s budget is based on a record high oil price of $58 a barrel.