Oman prepares less ambitious investment plan

02 November 2015

Masterplan for 2016-2020 likely to include capital spending cuts

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)
RevenuesH1 2014H2 2014H1 2015
Petroleum revenues (ROm)7,5157,3254,646
Non-petroleum revenues (ROm)8,62710,3018,950
Source: NCSI
Oman economic data
Key indicators2008-12^201320142015e2016f
GDP growth (%)5.84.72.94.42.8
Non-oil GDP growth (%)6.76.56.54.54.5
Fiscal balance (% of GDP)7.43.2-1.5-24.0-20
Gross government debt (% of GDP)5.55.15.19.312.2
Total government revenue (% of GDP)45.049.147.239.538
Total government revenue ROm9,28113,90814,1085,953*na
Total government expenditure (% of GDP)39.747.250.260.061.4
Total government expenditure ROm9,49913,99015,1727,835*na
^=Average; e=Estimate; f=Forcast; *=Figures from January to August 2015; na=Not available. Sources: IMF; NCSI.
Oman conventional banking system
DateTotal depositsTotal creditCredit to deposit ratio
Aug-1417,24516,28394.4
Sep-1417,11416,51196.5
Oct-1417,14916,58896.7
Nov-1417,32016,81697.1
Dec-1417,27916,89897.8
Jan-1517,43616,94697.2
Feb-1517,58117,13797.5
Mar-1517,95717,40796.9
Apr-1517,78017,52298.6
May-1518,55217,44894.1
Jun-1518,50717,82496.3
Jul-1518,34217,89797.6
Aug-1518,24118,00998.7
Source: Central Bank of Oman

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