For the last part of 2014, Oman’s government tested the waters by floating suggestions on subsidy cuts, tighter corporate tax and budget cuts for non-essential projects

A budget trimmed of all but essential spending was expected, but not delivered. Spending on capital projects, social services and subsidies have all increased, for a record RO14.1bn ($36.7bn) budget.

The logic behind continuing to spend is clear. It is imperative for Oman to invest boldly in infrastructure to diversify its economy. Oil revenues are set to decrease in the long term, as Oman exhausts its reserves and increasing non-conventional production in other parts of the world competes.

The tourism, fishing, and industrial sectors, currently contributing less than 50 per cent of GDP, have been targeted. The $8bn already committed to projects are vital to drive private investment and employment.

A 129 per cent increase in the education and health budgets will foster the human capital necessary for successful diversification, and are needed for a growing population.

Continued high spending is unsustainable, however. By running an 8 per cent deficit and increasing borrowing, Oman is putting off the pain until 2016 or later.

Delaying subsidy cuts, which encourage wasteful consumption and benefit wealthier sections of the population, is a wasted opportunity to rein in social spending.

Oman has already committed to increasing public sector wage, welfare and subsidy bills. Following the wave of unrest across the Middle East since 2011, Muscat fears that any cuts will provoke discontent or even protests.

Oil revenues might never return to 2013/14 levels. Spending cuts will have to come, but postponing them means more difficult decisions in the medium-term.