Muscat released an expansionist budget for 2006 in early January, and announced that gross domestic product (GDP) expanded by 21.7 per cent in 2005. The government has also released details of the seventh five-year development plan.

The 2006 budget forecasts a deficit of RO 650 million ($1,667 million), with budgeted expenditure rising by 15 per cent to RO 4,237 million ($10,864 million) and revenues up by 15 per cent to RO 3,587 million ($9,197 million). In 2005, the projected deficit was RO 540 million ($1,385 million), but high oil prices resulted in an actual surplus of RO 1,479 million ($3,793 million).

The new year’s budget is based on a projected average oil price of $32 a barrel – up from $25 a barrel in 2005 and close to the estimate used in the recently released budget from Saudi Arabia. Oil output in 2006 is forecast at 746,000 barrels a day.

Education is one of the biggest beneficiaries of the spending increase, with outlays rising by 17 per cent on the 2005 budget to RO 525 million ($1,346.2 million). Health spending is also set to expand substantially, to RO 187 million ($479.5 million).

The seventh five-year plan, covering the years to 2010, projects nominal annual GDP growth of at least 3 per cent. Among its priorities is further privatisation, the revenues of which will be put into a fund devoted to economic diversification.