Oman focuses on non-oil revenue, austerity in 2016 budget
Oman ratified its budget for the 2016 fiscal year on Sunday, introducing a number of austerity measures and a five-year plan to increase non-oil revenue as falling crude prices keep its economy under pressure.
Revenues for 2016 are estimated at OMR 8.6 billion, marking a year-on-year (YOY) decline of four percent.
“The decline in overall revenues is attributed to the average oil price assumed in the budget, as this price has been brought up close to the current and projected prices,” the country’s finance ministry said in a statement.
Oil and gas revenues were estimated at OMR 6.15 billion, accounting for 72 percent of total revenues, while non-oil revenue stood at OMR 2.45 billion, or 28 percent of total revenues.
Under the new five-year plan (2016-2020), Oman’s government will plan to reduce tax exemptions and increase corporate tax to boost non-oil revenue. Around OMR 4 billion will be allocated to the country’s education, health and social welfare sectors.
Subsidies are set to be slashed by 64 percent or OMR 710 million this year, compared to the 2015 budget.
Spending on oil and gas production is seen to drop 14 percent this year when compared to 2015. Allocations to security and defense sectors were also cut by 12 percent YOY to OMR 3.5 billion.
The budget deficit for 2016 is estimated at OMR 3.3 billion, or 38 percent of overall revenues.
The 2015 fiscal deficit was estimated at OMR 4.5 billion; an 80 percent increase from the previous estimate.
“Such a high deficit is driven by lower oil prices realized in the same year,” the ministry said, adding that “47 percent of the deficit has been covered by borrowing from domestic and external sources, such as issuance of Islamic bonds, development bonds, treasury bills and commercial loans.”
The remaining 53 percent of the deficit was said to be covered by drawing on fiscal reserves.