High spending turns first half surplus into deficit despite rise in oil income
A surge in expenditure turned an actual surplus in Oman's budget in the first half of this year into a deficit in the first nine months despite a surge in its oil export earnings, official figures showed on Sunday.
The figures by Oman's Ministry of National Economy earlier showed the budget recorded a surplus of around RO708.2 million in the first half of this year but it turned into a deficit of RO111.7 million in the first nine months.
The 10-month shortfall is way above the deficit of RO34.8 million recorded in the same period of 2009, the Ministry said in its October economic bulletin.
The figures showed the budget recorded a deficit because of a surge in spending, including what the report called "actual expenditure under settlement", which it put at RO673.4 million in the first nine months.
General spending stood at RO5,202 million, bringing the total spending to nearly RO5,875.4 billion in the first nine months of 2010.
The level is nearly 13.5 per cent higher than the actual expenditure of RO5,172 million in the first nine months of 2009, according to the report.
It showed total revenue surged to nearly RO5,763.7 million in the first nine months of 2010 from around RO4,827.6 million because of a sharp rise in oil export earnings to nearly RO3.926 billion from RO3.07 billion.
The surge in oil exports was a result of nearly $15-per-barrel increase in crude prices and a large rise in Oman's crude output as the Gulf country is pushing ahead with an ambitious programme to reverse a fall in its oil production in previous years due to lower investment.
Oman's oil output soared to nearly 860,000 barrels per day in the first nine months of this year from around 806,000 bpd in the same period of 2009. This year's output is the highest in nearly eight years.
A breakdown showed the increase in expenditure was mainly in current spending, which swelled to abut RO3,110.8 million in the first nine months of this year from around RO2,880 million in the first nine months of 2009.
Investment expenditure slipped to around RO1,734.8 billion from RO1,741.5 billion mainly because of lower funds for oil production as they fell by around 19 per cent to RO444.3 million from RO547.9 million. Investment in gas production
also dropped by 13.9 per cent to RO207.3 million from RO240.8 million.
Higher expenditure allied with a surge in oil production and prices to boost Oman's nominal GDP by nearly 33.9 per cent to RO10,862 million in the first half of 2010 from around RO8,110 million in the first half of 2009.
The report showed the oil sector shot up by around 82.9 per cent while there was growth of 31.6 per cent in the gas sector, and 34.1 per cent in the manufacturing sector. Most other sectors recorded growth except hotels and restaurants.
Buoyed by stronger oil prices, Oman early this year joined other Gulf nations in announcing a record high budget with an ongoing fiscal expansion programme to cushion the effects of the 2008 global financial turbulence.
The 2010 budget was based on a more optimistic oil price of $50, according to Omani Minister of National Economy Ahmed Mecki, who put spending at RO7,180 million (Dh68.9 billion), nine per cent above the 2009 record budget.
Revenues, generated mostly from oil and gas sales, were assumed at RO6,380 million (Dh61.2 billion), leaving a deficit of RO800 million (Dh7.68 billion).
Official data showed the revenues include around RO4,050 million (Dh38.8 billion) in oil exports, accounting for about 63 per cent. Gas revenues are estimated at nearly RO800 million (Dh7.68 billion).
Releasing its 2009 report last month, the Central Bank of Oman said the government considered $50 as a conservative oil prices given the growing sighs of global economic recovery and forecasts that prices would end the year much higher. It said this year's price forecast was higher than last year's $45 a barrel.
"As is traditionally the case, and based on conservative crude oil price assumption used for government budget for the year 2010, a fiscal deficit of RO 800 million is anticipated compared to a deficit of RO810 million estimated in the 2009 budget," CBO said in its 125-page report.
"The fiscal deficit under the 2010 budget is to be financed from government reserve funds although there is a scope for borrowing or a combination of both.
As the average price realization for Omani crude is expected to be much higher in 2010 than the budget assumption of $ 50 per barrel, pressure on the overall fiscal balance may be less than in 2009."
CBO's figures showed Oman's budget deficit in 2009 was cut from a projected RO810 million (Dheight billion) to around RO680 million (Dh6.7 billion) at the end of the fiscal year because of higher than expected oil export earnings.
© Emirates 24|7 2010
