Muscat is preparing its next five-year plan for investment in the sultanate in a context of narrow fiscal constraints

Representatives from the Central Bank and the Ministries of Health and Transport & Communications, speaking at MEED’s Oman Projects Forum from 26-28 October, said a much smaller capital spending budget is likely to be agreed.

They expect a higher proportion of soft infrastructure projects, such as developing technology and human resources, and a larger role for the private sector.

Oman’s spending reached RO7.8bn by the end of August 2015, 3.2 per cent lower than spending in 2014. Investment expenditure fell 2.5 per cent to RO1.9bn over the first eight months, according to the National Centre for Statistics & Information (NSCI). As revenues fell 36.3 per cent to RO5.9bn for January to August 2015, a fiscal deficit of RO2.7bn opened up, according to NCSI figures.

With oil prices expected to average $50.4 a barrel in 2016, according to the IMF, Oman is preparing for some big budget cuts. Revenues are expected to fall by 7.7 percentage points of GDP in 2015, then another 1.5 percentage points in 2016, according to the IMF. Oman has a large subsidy and public sector wage bill, which is difficult to cut. This means investment spending is more likely to suffer.

Oman hopes that the private sector will plug its funding gap on much-needed infrastructure projects. This will require significant lending by banks.

However, liquidity is starting to tighten. The credit to deposit ratio across the Omani banking system rose from 97.8 per cent at the end of 2014 to 98.7 per cent in August. Banks have grown their loan portfolios by 10.6 per cent year-on-year in August. But between July and August 2015, the rate slowed to an annualised 7.5 per cent, possibly due to seasonal variations.

Oman will have to look to alternative sources of financing, such as international banks, export credit agencies and debt markets.

Government revenues (ROm)
Revenues H1 2014 H2 2014 H1 2015
Petroleum revenues (ROm) 7,515 7,325 4,646
Non-petroleum revenues (ROm) 8,627 10,301 8,950
Source: NCSI
Oman economic data
Key indicators 2008-12^ 2013 2014 2015e 2016f
GDP growth (%) 5.8 4.7 2.9 4.4 2.8
Non-oil GDP growth (%) 6.7 6.5 6.5 4.5 4.5
Fiscal balance (% of GDP) 7.4 3.2 -1.5 -24.0 -20
Gross government debt (% of GDP) 5.5 5.1 5.1 9.3 12.2
Total government revenue (% of GDP) 45.0 49.1 47.2 39.5 38
Total government revenue ROm 9,281 13,908 14,108 5,953* na
Total government expenditure (% of GDP) 39.7 47.2 50.2 60.0 61.4
Total government expenditure ROm 9,499 13,990 15,172 7,835* na
^=Average; e=Estimate; f=Forcast; *=Figures from January to August 2015; na=Not available. Sources: IMF; NCSI.
Oman conventional banking system
Date Total deposits Total credit Credit to deposit ratio
Aug-14 17,245 16,283 94.4
Sep-14 17,114 16,511 96.5
Oct-14 17,149 16,588 96.7
Nov-14 17,320 16,816 97.1
Dec-14 17,279 16,898 97.8
Jan-15 17,436 16,946 97.2
Feb-15 17,581 17,137 97.5
Mar-15 17,957 17,407 96.9
Apr-15 17,780 17,522 98.6
May-15 18,552 17,448 94.1
Jun-15 18,507 17,824 96.3
Jul-15 18,342 17,897 97.6
Aug-15 18,241 18,009 98.7
Source: Central Bank of Oman

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