Muscat: Oman’s budget deficit for the first eight months of 2016 surged ahead by 63 per cent to OMR4,371.6 million, as plunging crude oil export revenues started affecting the government’s fiscal balance.
This is against a projected deficit of OMR3.3 billion for the entire 2016 and a deficit of OMR2,681.6 million for January-August period of 2015, according to data released by the National Centre for Statistics and Information (NCSI) on Sunday.
“Deficit for this year is high primarily because the average crude oil price was low in the first half. Now it is close to $50 per barrel and it is quite unlikely that it will remain at the 2015 low levels again. So, the deficit level could be lower in 2017, which again will depend on the expenditure and estimated revenue,” said S. Suresh Kumar, head of research at Al Maha Financial Services.
“Now the government has to give a larger scope for the private sector to step in to enhance investment (as partners), which will help the economic growth and reshape the structure of the economy,” said a senior economist, who does not want to be named.
“The government also has to rationalise and prioritise investments (to contain deficit),” added the economist.
“When we consider deficit, we should take into account the ratio of deficit as per cent of gross domestic product (GDP) and the government’s ability to service debt. As long as the government can service its debt, it is not a major issue,” noted the economist.
Led by Saudi Arabia, all GCC countries are facing mounting deficit due to plunging oil revenue.
The country’s net oil revenue for January-August period of 2016 plunged by 43.6 per cent to OMR2,126 million from OMR3,770 million for the same period of last year, which was mainly due to a 36 per cent plunge in the average price of Oman Crude at $38.3 per barrel for the first nine months, against $59.8 a barrel for the same January-September period of last year.
Revenue from natural gas showed a fall of 7.5 per cent at OMR868.3 million during the first eight months of 2016, compared to the same period of last year. In fact, the average price of Oman Crude at $38.3 per barrel is much lower than the budget estimate at $45 per barrel.
The overall revenue of the government dipped by 28.3 per cent to OMR4,267.4 million for January-August period of 2016.
The government is likely to look at more austerity measures and will cut subsidies wherever possible.
The overall crude oil production of the country grew by 2.9 per cent to 274.89 million barrels for the January-September period, which was equivalent to an average of 1,003,200 barrels per day.
As far as the expenditure is concerned, there was a 5 per cent fall in total expenditure, which stood at OMR7,439 million during the eight-month period, against OMR7,834.6 million for the same period of last year.
Oman government’s expenditure and revenue for 2016 are estimated at OMR11.9 billion and OMR8.6 billion, respectively.