Budget for 2016 shrinks by 11 per cent
Oman plans to cut overall spending by 11 per cent to RO11.9bn ($30.9bn) in its 2016 budget, as oil revenues fall.
Measures include a 14 per cent cut in oil and gas expenditure to RO1.79bn and an 18 per cent cut in development project spending to RO1.35bn. Non-essential projects will be postponed.
Actual development project spending in 2015 reached RO1.8bn while oil and gas production expenditure was RO2.1bn. This overshot the RO3.2bn budget set by 21.9 per cent.
Overall spending was lower than the record RO14.1bn budget, at RO13.4bn.
Total revenue in 2016 is projected to be RO8.6bn, 4 per cent lower than actual revenues in 2015, and down 39 per cent from 2014 revenues of RO14.1bn.
Oil and gas revenues are estimated at RO6.15bn for 2016, although the oil price estimates for the budget were not published. Oil revenues fell 24 per cent or RO2bn over 2015.
To compensate, Muscat will raise corporate taxes, enhance tax collection measures and review fees for government services. It plans to continue the privatisation of state-owned companies.
Oman also intends to cut current expenditure by 12 per cent to RO4.62bn though a hiring freeze and other cost-cutting measures.
The subsidy bill is expected to fall 64 per cent from RO710m to RO400m in 2016.
Subsidy reforms include changes to electricity and water tariffs and fuel prices. The latter will be set monthly from 15 January, to bring them in line with global fuel prices. This follows the model implemented by the UAE in 2015.
Planned social spending is set at RO2.5bn for education, and RO1bn for health, cuts of 17 per cent and 38 per cent respectively.
The 2016 budget deficit is projected at RO3.3bn or 13 per cent of GDP. It will be funded by domestic and international borrowing, and drawdowns from sovereign wealth funds.
The 2015 deficit is estimated at RO4.5bn, 80 per cent higher than projected due to oil prices falling well below the $75 a barrel budgeting figure. 53 per cent of the deficit was financed through withdrawals from reserve funds, or around RO2.4bn, with the remainder through domestic bond issuance.
More details on Omans 2016-20 five year plan were also released. It envisages average investment of RO8.2bn a year, and a GDP growth rate of 3 per cent. This is significantly less ambitious than the 2011-15 plan, which saw a non-oil growth rate of 7.2 per cent a year.
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