Glimpses of Oman’s Budget – 2024

Business Sunday 07/January/2024 17:34 PM
By: A. V. Manohar
Glimpses of Oman’s Budget – 2024
A. V. Manohar, Chief Executive Officer, Wisdom Business and Training Services

The recently released Oman’s Budget – 2024, encompassing the financial programme of the country reveals the objectives, priorities, strategies and the resources, paving the way for all-round improvement in the socio- economic structure of the country.

The Financial Plan has been crafted against the backdrop of numerous global challenges, as indicated by IMF (International Monetary Fund), such as geo-political tensions, weakening economic growth, oil price volatility, increasing interest rates, climate change and natural disaster, which all had a role in denting the global financial stability and the individual countries as well.

The Budget 2024 lays down the guide-posts for accelerating the growth and creating a conducive business environment. Achievement of fiscal sustainability, stimulating national economy, accelerating non-oil revenue, improving spending efficiency, attracting foreign investments, controlling deficit, lowering of public debt, stabilising the inflation rate, sustaining employment creation, implementation of high-priority projects, fulfilling basic needs, continuing welfare subsidies and harnessing human resources are all the chosen areas for priority.

It is heartening to note that the proactive steps taken in the earlier years towards the management of the economy under the broad frame-work of the Tenth Five Year Plan (2021 – 2025) have yielded positive results during 2021 to 2023. Overall reduction in Fiscal Deficit in 2021 by OMR1,233 million, achievement of Fiscal Surplus by OMR1,146 million in 2022 and OMR931 million in 2023 have therefore added new dimensions to the V year Plan of the Country.

Going by the strategies being followed towards management of the fiscal figures, it is likely that the year 2024 will again end with a decent amount of fiscal surplus, though the Budget 2024 projects a Fiscal Deficit of OMR640 million. Any upward swing in oil price from $60 per barrel, being taken in Budget 2024 against the Global price of $80 projected by IMF for 2024, will augur well for this optimism and favourable shift in the fiscal position.  

In terms of Real GDP Growth, the main indicator for assessing the efficiency of the economy, Oman will achieve 2.3 per cent in 2023 and 2.4 per cent in 2024. However, the biggest impetus being given towards acceleration of investments in projects in the country will pave the way for enhancing the income stream and contributing to the growth of the economy in the future.  

Reduction in public debt by OMR2.4 billion in 2023 i.e from OMR17.6 billion in 2022 to OMR15.2 billion in 2023 is a notable achievement. The surplus generated from Oil Revenue has been substantially deployed to reduce the borrowings and consequently the debt service costs.

The expected Fiscal Deficit of OMR640 million is proposed to be funded by External Borrowings by OMR240 million, (In 2020, it was OMR2 billion), substantially reduced from the earlier years and OMR400 million from Sovereign Reserves, as in earlier years.

Despite the heightened financial shocks faced globally in 2023, inflation was minimal at 1.03 per cent in 2023 in Oman, thanks to the measures taken towards curbing inflation in the area of subsidies on food and fuel.

It is heartening to note that the above salient measures such as strengthening of public finance, reduction in public debt and rebound in oil prices have resulted in enhancing the Credit Rating from the various agencies such as Moody’s, S&P and Fitch and the outlook for the country, which will set the trend for generating higher inflow of Capital into the country by way of investments.

While analysing the Income stream, the proportion between Hydro Carbon (Oil & Gas) and Non-Hydro Carbon which was 72:28 in 2023 is expected to become 68:32 in 2024, which is indeed a good development. The 5.7 per cent increase in Non-Hydro Carbon revenue by OMR190 million (From OMR3,330 million in 2023 to OMR3,520 million in 2024) has made a shift in this ratio, which is a welcome feature.

Gross revenue is estimated to grow by 9.5 per cent over Budget 2023 in 2024 to touch OMR11,010 million (Hydro Carbon Revenue OMR7,490 million and Non-Hydro Carbon Revenue and taxes aggregating to OMR3,520 million). Gross spending is likely to go up by 2.6 per cent over 2023 Budget in 2024 to OMR11,650 million, (OMR3,070 million for Defense & Security, OMR4,453 million for Civil Ministries Expenditure, OMR1,050 for Public Debt Service, OMR900 million for development of projects in education, health, sports,  housing, transport and agriculture sectors and OMR2,177 towards social protection contributions, subsidies and other expenditure.

As the spending is more than the income generation, the Budget 2024 carries a Fiscal Deficit of OMR640 million, working out to 6 per cent of the total revenue and 1.5 per cent of the GDP of the nation.

Oman’s Investment and Development landscape includes proposed spending of OMR3.9 Million in 2024 through government’s investment arms namely OMR1.25 billion by Oman Investment Authority (OIA), OMR1.5 billion by Energy Development Oman (EDO) and OMR1.14 billion through development budget allocations. Besides, Oman Future Fund, Oman Development Bank, Public Private Partnership Programme shall continue to enhance the investment climate in Oman.

The government’s initiative in setting up a National Programme for Fiscal Sustainability and Development Financial Sector (ESTIDAMAH) is a major step in National Building Process. It aims to empower financial sector’s twin pillars namely banking and capital market to achieve economic and investment goals as set forth in Vision 2040. SME financing, supporting target sectors, green and sustainable finance, boosting domestic capital, foreign investment flow and insurance have been identified as the focus areas. Fintech, Laws and legislation, Financial Literacy and Human Competency Development Programme are determined to be the programme enablers in this process.

Besides, setting up of National Programme for Economic Diversification (TANWEA’A), Government Digital Transformation Programme, National Programme for Investment and Export Development (NAZDAHIR), National Employment Programme  TASHGHEEL) and National Zero Neutrality Programme will all pave the way for establishing a greater Oman in the near future.

It is important to note that government has embarked upon various actions and set up systems towards improving the fiscal performance and instilling financial discipline. Development of sustainable financing framework, pricing of government services, supply chain finance project, public debt law, revision of financial laws and executive bye laws, programme based budget, government financial system (MALIYAH), Debt Management System (DMS), Treasury Single Account (TSA) and National Register are under various stages of development. Upon completion, the beneficial effects of these will percolate into various channels of the economy.

Overall, Budget – 2024 is a well-crafted blue-print of action, comprehensively covering different facets of the economy and balancing between the challenges on hand and the objectives set for achievement in future.