Muscat: A recovery in crude oil prices and prudent economic policies of the Oman government have resulted in a marked drop in the country’s budget deficit for the first nine months of this year.
The Sultanate’s budget deficit for the January-September period of this year declined by 32.2 per cent to OMR3 billion, from OMR4.43 billion during the same period in 2016.
Market analysts believe that it is a healthy trend as the government is now in a comfortable position as far as fiscal management is concerned.
“What we are seeing is a narrowing down of deficit primarily because of an increase in oil price. However, to achieve a break-even (or zero deficit level), the oil price has to reach $75 per barrel, which is quite unlikely this year,” said S Suresh Kumar, Head of Research at Al Maha Financial Services.
Since the beginning of this year, the Oman government has adopted a series of measures to bring down deficit, which included both austerity measures and steps to enhance non-oil revenues.
“The economy is in a better position compared to last year,” Suresh Kumar said, adding; “We expect the oil price to stabilise at $60 per barrel, mainly on account of the possibility of Opec and non-Opec members extending production cut beyond March 2018.” He also noted that the operating cost of shale producers was coming down.
In fact, the average price of Oman Crude soared by 30.2 per cent during the January-October period of this year to $50.6 per barrel, from $38.9 per barrel during the same period last year. This is against the government’s assumed price of $45 per barrel for estimating the budget revenue for this year. This helped achieve a 20 per cent growth in the overall revenue at OMR5.97 billion, as net oil revenue alone shot up by 34.8 per cent to OMR3.31 billion during the nine-month period under review.
Further, the removal of subsidy on petroleum products, an increase in the price of natural gas supplied to industries, a rise in the fees of several government services and a control over the new appointments in the public sector helped control government expenditure.
Still, current expenditure rose by 5.2 per cent to OMR6.05 billion, while investment expenditure increased 7.2 per cent to OMR2.03 billion. As a result, the total government expenditure stood 4 per cent higher at OMR8.43 billion during the January-September period of 2017, compared with the same period last year.
Oman produced 294.88 million barrels of crude oil and condensates in the first 10 months of 2017, indicating a fall of 3.7 per cent compared to the same period last year. The average daily production of crude oil alone fell by 3.4 per cent to 970,000 barrels during the January-October period of 2017, from 1004,100 barrels in the same period last year.