MUSCAT -- On the back of higher oil prices and the commitment to implement projects stated in its Five Year Plan, the Omani Government has become relatively aggressive in awarding the construction and infrastructure projects in the country from the beginning of the year. The Tender Board of Oman has so far awarded tender worth a record RO 604 million for various projects.
With the government entering into the penultimate plan of its Vision 2020 strategy, the overall allocation towards various development projects including roads, ports, housing, airports, health and service sectors has reached about RO 12 billion. On an average the government is expected to spend RO 2 billion per year over the next five years on numerous projects. In addition, the total projects planned or under way in Oman stands at RO 44 billion.
"The current economic indicators suggest that the Omani government has enough funds in reserve to make financing available for the ongoing process of infrastructure growth in the country", says Sankar Kailasam, Senior Vice-President of Gulf Baader Capital Markets. Although there has been fall in the oil prices, it is not expected to affect the spending level nor the budget. The first months of the current year saw higher prices. The budget is set at a break-even level of $ 75 per barrel.
The budget balance in January-February indicates a surplus of RO 756 million, against a deficit of RO 85 million in the corresponding period last year. The surplus was mainly thanks to a 43.4 per cent rise in oil export earnings to nearly RO1.53 billion from RO1.07 billion due to a sharp rise in crude prices and a slight increase in Oman's oil production to nearly 888,800 barrels per day from 887,100 bpd in the same period, the data shows.
The total revenues witnessed an increase by 30.8 per cent posing RO 1.85 billion as compared to RO 1.42 billion during the same period last year. Investments during the Eighth Five-Year Plan stand at RO 30.487 billion, including an additional allocation of RO 1.6 billion towards infrastructure projects in the Budget 2012. Oman's 2012 budget foresees a nine per cent growth in public spending, with an allocation of a total of RO10 billion for public expenditure. There is a clear focus on social aspects with increased current expenditure on areas such as education, health and social security by 18 per cent.
"The prevailing robust pipeline of project spending will aid in the creation of strong infrastructure story in Oman attracting several global majors to the country, in addition to providing more benefits to the local players", Sankar says. Cement sector firms in Oman are scaling up their production capacity to meet the ever-rising local demand. So are the steel sector and other related firms.
The expected spending level in 2012 will be slightly more than 2011 outlays. The nine per cent growth in public spending covers most of this committed expenditure, as well as additional requirements resulting from providing increased employment opportunities for the Sultanate's citizens.
The domestic economic scenario witnessed improvement in 2011, driven by higher oil revenue and prudent macro-economic policies adopted by the government. Higher than forecasted oil revenue resulted in budget surplus despite increase in government spending. Inflation has remained at acceptable levels and IMF forecasts inflation to moderate to 3.3 per cent in 2012. Overall the government infrastructure investment size during the Eighth Five Year Plan stands at RO 30.487 billion.
© Oman Daily Observer 2012
