Wednesday 14th, December 2016

A deficit of around RO 3 billion is forecast in the 2017 Oman Budget based on an oil price of $45 per barrel and output averaging one million barrels per day, according to a high-ranking Omani government official.

Mohammed Jawad bin Hassan bin Suleiman (pictured), Adviser at the Ministry of Finance, noted that any proceeds from oil revenues over and above this assumed price will be offset against these deficits.

“Based on an assumed price of $45 per barrel and an output of 1 million barrels per day, we are expecting a deficit (in the 2017 budget) of around RO 3 billion. Any surplus revenues earned from oil prices higher than this level will be mainly used to cover the deficits, and not to increase expenditure,” the official stated here yesterday.

Speaking to journalists on the sidelines of a tax workshop hosted by leading tax consultant Crowe Horwath International at the Sheraton Oman Hotel, Mohammed Jawad, also outlined plans by the government to raise finance either through bond issuances or borrowings.

“Of course, there is a plan for borrowings (in 2017), but we will have to study the conditions first to decide whether to approach the money market or bond market; and if it is the bond market, then whether the issuance will be a normal bond or sukuk.” The plan for borrowings, he said, has already been finalised, but details will be forthcoming only once the 2017 national budget is announced.

With a view to paring state expenditure going into 2017, the upcoming state budget will also introduce a kind of “budgetary reforms” designed to cut expenditure, said Mohammed Jawad, without detailing the nature of these changes.

Importantly, the 2017 budget proposals envision a major role for the private sector in supporting the nation’s infrastructure and economic development, according to the Adviser. This role will be based on the Public-Private-Partnership (PPP) model, he said. “The PPP model is a priority for the government and is designed to give a bigger chance to the private sector to partner with the government in the implementation of projects,” Mohammed Jawad said, adding that the projects to be taken in hand for PPP-based execution will be those that appeal to private investors.

A dramatic slump in global oil prices has cut Oman’s export oil revenues by more than 50 per cent, generating a budget deficit projected to reach RO 3.3 billion in 2016, down from RO 4.5 billion a year earlier. A combination of austerity measures, spending cuts, subsidy rollbacks and higher taxes has helped to reduce the burgeoning deficit burden on the government.

© Oman Daily Observer 2016