Oman's state budget focuses on austerity, non-oil income

Business Sunday 03/January/2016 02:18 AM
By: Times News Service
Oman's state budget focuses on austerity, non-oil income

Muscat: Oman government on Saturday unveiled details of its state budget, with major austerity measures and steps to raise non-oil income.
The total revenue is estimated at OMR8.6 billion, a fall of 4 per cent compared to the actual expected revenues of 2015. The government revenue estimate in 2016 comprises income from oil and gas at OMR6.15 billion, representing 72 per cent of the total revenues. The non-oil revenue estimates for 2016 amount to OMR2.45 billion, representing 28 per cent of total revenue estimate.
The non-oil revenues are expected to reach OMR1.9 billion in 2015.
Also, as much as OMR4 billion has been allocated for education, health and social welfare, which include OMR2.5 billion for education sector, OMR1.3 billion for healthcare sector and OMR163 million for social care.
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The total expenditure is estimated at OMR11.9 billion, a decline of OMR1.5 billion or 11 per cent from the actual spending expected for 2015.
The expenses for oil and gas sector are estimated at OMR1.79 billion, a 14 per cent dip from the estimates of 2015 budget.
The current expenditure of the ministries and government departments are estimated at OMR4.26 billion, showing a decline of 12 per cent compared to the budget estimates for 2015. This figure included salaries and entitlements of employees at OMR3.3 billion and operation expenses of OMR1.1 billion.
The spending on development projects is estimated at OMR1.35 billion represents the cash to be spent during the year. The reduction in project investment amounts to 18 per cent compared to 2015 budget. The total provision for security and defence expenses is estimated at OMR3.5 billion, 12 per cent fall compared to 2015 budget. The defence expenditure comprises salaries and entitlements of employees besides the operation expenses and capital expenses.
Read also: Oman faces up to new economic reality in 2016
Subsidy estimate falls to OMR400m
The subsidies are estimated at OMR400 million, a reduction of OMR710 million (or 64 per cent) compared to the amount approved for 2015 budget. Further, OMR240 million is allocated for other expenses, a reduction of 10 per cent.
The deficit of the budget is expected to reach OMR3.3 billion, which is 38 per cent of the total revenue and 13 per cent of the gross domestic product. The deficit will be covered through borrowing from both domestic and overseas markets.
Focus on austerity measures
In a move to reduce expenditure, the state budget proposed to amend the local prices of fuel to make such prices conform to the global prices, to suspend expansion of organisational structures at the ministries and government units, to postpone the award and execution of unnecessary or unimportant projects, to cancel family cars and tour vehicles allocated for ministers, undersecretaries and senior officials, to cancel allocation of government vehicles for some positions and instead pay conveyance allowance determined as per the approved regulations, to prohibit the use of government cars after office hours and to review the fleet of vehicles of each government unit in light of the actual need and to return the extra vehicles to the Ministry of Finance.
Other measures for cutting expenditure include using Oman Post for correspondence between various ministries and their affiliated offices and to cancel all cars and administrative expenses associated with it, to intensify the use of e-mail between the departments and divisions of the government, directorates with their branches and to minimise paper work among departments, to transfer some government services to the private sector by way of tenders, to limit days of travel, to limit overseas training unless it is necessary and justified and to pay employees tickets rather than encashment when such employee is on official tour abroad.
Also, the state budget proposed to limit the expenses incurred on entertainment and hospitality at the ministries and various departments along with the administrative expenses and other unnecessary expenses, to take actions for saving electricity consumption by switching off lights and air-conditioners in administrative offices and other buildings of the ministries and departments, to award the maintenance and minor repair works to private firms and to reduce the administrative jobs.
Non-oil revenues
In a move to shore up non-oil revenues, the state budget proposed a series of measures, including an increase in corporate income tax, to limit tax exemptions, to enhance the efficiency of tax collection mechanisms, to apply the new accounting system for calculating customs duty at all border posts, to amend the measures applied on exemption from customs duty and to collect fee on clearances and labour cards, to amend the tariff of electricity and water for commercial, industrial and government usage and to amend the fee disposal of real estate and municipality fee on rents.
Other measures to enhance non-oil income include amendment in fees charged for allocation of land (commercial, tourism, industrial and agricultural), unification of service fee of Muscat Municipality, Dhofar Municipality and other regional municipalities, to amend the fee for registration and renewal of vehicles and driving licence and to amend the fees for some services offered by the ministries and government units.
The state budget 2016 aimed at enhancing the economic growth through spending on projects of economic and social significance, continuation in the provision of the necessary support to generate an environment that encourages the growth and investments of the private sector, to set a medium–term framework and a ceiling for the state budget, to rationalise the general spending, to work on restructuring of the resources by increasing the contribution of the non-oil revenues in the total revenues and to reduce the level of dependability on oil-revenues, to reduce the potential impacts of the deficit in the budget on financial and economic stability of the state.
It is also aimed at enhancing the performance of the government-owned companies through establishment of holding companies, which set the plans and strategies and supervise on such government-owned companies in accordance with a good governance and to increase the contribution of such companies in the national economy.
2015 revenue and expenditure
The ministry statement said that the total actual revenue is expected at OMR8.9 billion, a fall of 23 per cent from the initial budget estimate. The reduction was due to a fall in oil prices witnessed last year. The total spending is expected to reach OMR13.4 billion compared to OMR14.1 billion in the budget estimates. This was due to a reduction in spending as per the measures taken at the beginning of the year in order to face the low oil revenues. The actual deficit for the fiscal year 2015 was around OMR4.5 billion according to the initial calculations, which is showing an increase of 80 per cent against the deficit expected in the budget. The increase in deficit is attributed to a fall in oil prices.
The budget estimates were prepared at a time when the global crude oil prices have shown a major slump and an uncertainty in the market. “This will no doubt make it difficult to present precise estimates in spending mainly that oil still represents the main source of the state budget,” added the ministry statement.
In implementation to the provisions of the Royal Decree No.2/2016, ratifying the 2016 State Budget, the Ministry of Finance will submit a comprehensive report on the budget to The Financial Affairs and Energy Resources Council in the middle of the year. The report will also handle the budget in light of the international economic and financial developments and the prices of oil. The ministry will also issue periodical reports on the various aspects of the budget, detailing spending, revenue and deficit.
Consultant studies privatisation of state-owned companies
MUSCAT: Privatisation or disinvestment of government-owned companies will be implemented in line with a programme prepared for 2016-2020 period. The state-owned firms for divestment will be identified on completion of the study by a consultant, which is currently under way. The programme is aimed at expanding the participation of private sector in acquisition, finance and management of projects. – ONA