Video: Oman is already deficit free
February 4, 2018 | 11:05 PM
by Shruthi Nair/[email protected]

Listen to the interview by clicking the orange 'Play' button: Muscat: Oman will soon be at break-even point, if oil continues to cost some $70 a barrel, according to the Chief Economist handling Oman’s sovereign wealth fund.

The Sultanate’s estimated Budget 2018 deficit of OMR3 billion has already been drastically reduced, thanks to a prudent budget, according to Fabio Scacciavillani of the Oman Investment Fund.

“The 2018 budget is already at a break-even point, despite the fact that the assumption of oil is at $50 per barrel and not $70 (which is the current oil price),” Scacciavillani said.

“In the 2018 budget, the current amount that the government spends on health, education, and subsidies has already been covered by oil revenues. The deficit, which is OMR3 billion and is equivalent to 10 per cent GDP, is exclusively due to capital expenditure,” he added. He further remarked that the current expenditure and the current revenue have already been balanced.

“Infrastructure in the oil and gas sectors and other key projects will give a positive return. So, this expenditure will generate enough resources to repay the debt. In that sense, the current expenditure and the current revenue are already balanced,” Scacciavillani noted.

Further, according to him, if the current oil price of nearly $66 per barrel persisted throughout the year, the deficit will be covered. He credited the government for being wise while making this year’s budget. “Prudent fiscal budget treats good news as temporary and bad news as permanent. So, they have treated this rebound in oil price as temporary and that puts Oman in a better position,” he explained.

Scacciavillani also expressed the opinion that the economic downturn over the last couple of years had created a sense of urgency to coordinate the diversification efforts throughout the country. “We have massive plans to launch fisheries and aquaculture industries. This project has been on the agenda for several years. Now, we are going to deliver,” he said.

All economic diversification efforts in the country, including Tanfeedh, have led to a start in numerous projects, including those in Duqm, Sohar, and Salalah, which will lead to creation of job opportunities in the country, especially for locals.

In fact, Scacciavillani said a six-month expat visa ban on certain professions has been put in place to benefit the local labour force. “The six-month visa ban aims at making sure the local firms make the effort to look into the local labour supply. After these six months, the results will be assessed to see whether there is a lack of certain skills, in which case the education system will have to be involved to provide these skills,” he added. Hiring and firing of the local labour force is another issue that has been in discussion for a long time. “It is more an issue of jurisprudence rather than law. Probably the private sector and the government need to discuss the issue of law protection versus local hiring,” Scacciavillani remarked.

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