Reforms and spending cuts in Oman will contain the 2016 fiscal deficit at 17.1 per cent of GDP, broadly in line with the 17.6 per cent deficit in 2015, according to the Washington-based IMF.

Non-oil GDP growth slowed to 4 per cent in 2015, and is likely to slow further in 2016.

Continuing reforms to create an improved business environment and priority government spending could allow this to recover in the longer term.

The cuts to government wages and benefits, subsidies, defence, and capital investment should save $4.5bn, or 8 per cent of GDP in 2016. and the introduction of value added tax and corporate tax reforms are expected to broaden government revenues in the medium term.

The current account deficit, which reached 18.7 percent of GDP in 2015, is expected to continue due to lower oil and gas receipts.

The IMF recommends further reforms and structural adjustment to improve Oman’s cost of borrowing, as it taps debt markets to fund its deficit. It urges Muscat to speed up its diversification and private sector strategies.