MUSCAT: The success of Oman’s fiscal reform agenda in strengthening public finances has been highlighted in a report featured on World Bank Blogs, the multilateral development financing institution’s official platform for analysis, commentary and insights on global development issues.

Jointly authored by World Bank experts Jasmin Chakeri, Hoda Youssef, Muhammad Khudadad Chattha and Yacine Ouahioune, the report outlines the key measures taken by the Omani government that helped reduce public debt from a peak of 68% of GDP in 2020 to 35% by the end of 2024.

“Oman’s experience illustrates the importance of fiscal sustainability as an ongoing process. For oil-rich economies, this includes managing spending during periods of high revenue and planning for long-term stability. Oman’s recent reforms and targeted support measures have contributed to a rapid improvement in fiscal indicators”, the experts wrote.

A pivotal moment, the report noted, came in 2020 with the introduction of the Medium-Term Fiscal Plan (MTFP), which set a five-year path to restore fiscal sustainability by reducing spending and broadening revenue sources. The government curtailed hiring, lowered the wage bill; and reformed fuel and electricity subsidies through a targeted support system, helping cut public expenditure by 16 per cent.

On the revenue side, Oman introduced a 5 per cent VAT in 2021 alongside existing excise taxes, maintained a 15 per cent corporate income tax for most firms, applied a reduced 3 per cent rate for SMEs and upheld a higher 55 per cent rate for oil and gas companies — all measures designed to build a more balanced and resilient fiscal framework.

“MTFP delivered strong results, exceeding its fiscal balance and debt targets”, the report stated. “The country not only balanced its books but has run fiscal surpluses since 2022. In 2024, Oman regained its investment-grade rating, attributed by credit rating agencies to improved debt indicators, stronger fiscal management and the implementation of economic reforms”.

Laudable was Oman’s decision to keep spending in check by trimming non-essential outlays rather than reducing essential services, the authors noted. At the same time, revenues were bolstered by widening the tax base instead of raising existing tax burdens. Crucially, when oil prices rose, the country used the windfall to pay down debt instead of raising expenditure, it was stressed.

A core ongoing priority is strengthening non-oil revenues, which help stabilise the economy during downturns and enhance long-term fiscal resilience. Oman has already taken significant steps, including the 2024 introduction of a Top-Up Tax for multinational groups in line with OECD BEPS rules, ensuring a minimum effective tax rate of 15 per cent. The country also plans to introduce the Gulf’s first personal income tax by 2028, starting with a 5 per cent rate on high earners — an approach other resource-dependent economies may consider.

Welcoming the progress made so far, the authors concluded: “As fiscal reforms remain an unfinished agenda, the next challenge for Oman will be maintaining momentum, requiring a steady commitment to build on the progress achieved. With fiscal reform complementing efforts to expand growth in new non-oil sectors under Oman Vision 2040, the future could be bright for fiscal stability and broad-based economic growth”.

2025 © All right reserved for Oman Establishment for Press, Publication and Advertising (OEPPA) Provided by SyndiGate Media Inc. (Syndigate.info).