Budget 2018: A helping hand for Oman
January 1, 2018 | 9:33 PM
by Syed Haitham Hasan/[email protected]

Muscat: The lion’s share of Oman’s spending this year will be on education, health, social housing and welfare, in a budget designed to be prudent but still assist those in need.

Read here: His Majesty approves Oman's 2018 budget

“About 3.88 billion Omani rials were allocated in the 2018 budget for education, health, housing and welfare sectors, which represent the largest share of the budget,” the Ministry of Finance said, in a statement released yesterday on Budget 2018.

Also read/ Budget 2018: Government outlines roadmap to the future

Government finance chiefs stressed that programmes to build social housing and give cash assistance to eligible groups of citizens would continue, even though these schemes will need an extra OMR80 million this year to fund them. Oman’s government has estimated a ‘prudent’ average oil price of $50 a barrel in 2018, which should allow Oman’s revenue for this year to grow by 3 per cent to 9.5 billion. The economy will see more expenditure this year as a cautious State budget 2018 maintains focus on the Sultanate’s long term goal of economic diversification.

Total spending for the year is set at OMR12.5 billion, an increase of OMR 800 million from last year, keeping the budget deficit the same as the 2017 figure, OMR3 billion or 10 per cent of Gross Domestic Product (GDP). Eighty four per cent of the estimated budget deficit, OMR2.5 billion, will be financed through external and domestic borrowings. The remaining OMR500 million will be funded trough withdrawals from reserves, the government revealed. OMR1.2 billion has been set aside to ensure all development projects under implementation are completed without any delay.

Oil and gas production expenditure will also increase by 15 per cent from 2017 estimates to OMR2.1 billion, The allocations of employee salaries and entitlements were estimated at OMR.3.3 billion.

According to the statement issued by the Ministry of Finance, the budget for the fiscal year 2018 aims to maintain the financial and economic stability of the state. Furthermore, it will raise the rate of economic growth and stability of the standard of living of citizens.

“The first thing one notices in the budget is that the price of oil assumed is quite conservative. This shows that the state budget 2018 rests on a cornerstone of prudence. Moreover, if we take into consideration that VAT has been deferred to next year, it is a very positive stimulus for the economy,” Fabio Scacciavilani, Chief Economist at Oman Investment Fund, noted.

“The approach of the budget is very prudent considering the oil price estimate and maintaining the deficit by increasing expenditure. This will help both in increasing economic activities and reducing the deficit.

The budget will help maintain credit ratings so it is easier to access international bond markets to fund the deficit,” Alkesh Joshi, Tax Partner at EY Oman, added.

The allocation of electricity and cooking gas, housing and development loans, and operational support to government companies amounted to OMR 725 million, an increase of OMR330 million from the approved budget in 2017.

The statement pointed out that the contribution of the private sector in the implementation of investment programs has increased from 52 percent in 2014 to 60 percent in 2017.

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