Oman’s public deficit reached RO1.9bn ($5bn) at the end of June, according to the National Centre for Statistics and Information (NCSI), compared with a projected full-year deficit of RO2.5bn

Oman’s half-year oil revenues fell 46.1 per cent, or RO2.4bn, in 2015 to RO2.9bn, compared with the same period in 2014. In the first quarter, the oil and gas GDP shrank 36.8 per cent compared with the same period in 2014, although non-oil GDP rose by 4.1 per cent, according to NCSI figures.

This is despite record oil output, as the sultanate reached an average of 1 million barrels a day (b/d) of condensate and crude in July.

Oil still made up 62.2 per cent of total government revenue, with gas making up another 15.4 per cent.

State investment spending fell 6.8 per cent over the first half of 2015 to RO1.3bn, compared with the same period in 2014. Total public expenditure fell 6.7 per cent over the period, despite an expansionary budget, according to the NCSI.

The budget was set around average oil prices of $75 a barrel, while actual oil prices averaged below $60 a barrel. Further falls in recent weeks suggest that Oman’s budget will overshoot its deficit by billions of dollars in 2015.

Oman intends to cover its public deficit by drawing down on reserves and issuing debt. So far in 2015, the central bank has issued RO500m of sovereign bonds on the domestic market, out of a planned RO600m.

The most recent issuance, RO300m in early August, was oversubscribed by 20.1 per cent. Investors achieved an average yield of 2.54 per cent on a coupon rate of 3 per cent a year.

Oman could increase its bond issuance programme in response to the higher than expected deficit.