Muscat: International Monetary Fund (IMF) lauded the Oman government for its reforms and move towards private sector-led growth and economic diversification.
IMF’s executive made the observations in its report based on the consultations it held with Oman under article IV of its agreement with the Sultanate. The board had spoken with Oman’s authorities on June 20.
“Directors welcomed the authorities’ efforts to bolster the fiscal position and encouraged implementation of structural reforms to boost private sector led growth, increase economic diversification, create jobs and foster inclusive growth,” a report disclosed by the IMF said.
Moreover, a projected continued increase in oil prices is also expected to help the Sultanate’s economy.
“Non-hydrocarbon economic growth is estimated to have picked up modestly in 2017 to about 2 per cent, from 1.5 per cent in 2016, as higher confidence in the wake of the rebound in oil prices helped offset the impact from fiscal consolidation on economic activity.
IMF also noted that up and coming infrastructure projects would aid in non-oil contribution to the economy in the near future.
“The government’s diversification efforts and the planned completion of major infrastructure projects are expected to gradually raise non-hydrocarbon growth to about 4 per cent over the medium term,” the report read.
Moreover, fiscal position has also improved from last year
“Preliminary budget execution data point to a significant improvement in the fiscal position last year as higher oil prices and spending restraint brought the overall deficit down to below 13 per cent of GDP. At the same time, the current account deficit is estimated to have improved by about 3 percentage points of GDP,” it added.
Oman was advised to implement the Value Added Tax (VAT) regime in a timely manner. “This would bring the deficit to around 4 per cent of GDP in the next two years,” IMF said.
Directors encouraged the authorities to accelerate reforms to bolster fiscal and external sustainability, maintain confidence, and support the exchange rate peg.
Under Article IV of the IMF's Articles of Agreement, the body holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
Lastly, the IMF warned about the general effect of the low oil price environment and falling production of petroleum.
“Reflecting the lower oil price environment, Oman has posted double-digit fiscal and current account deficits over the past few years, leading to large increases in government and external debt and a decline in external buffers. Against this backdrop, the authorities have launched reforms to bolster the fiscal position and boost private sector-led growth and diversification.
“However, overall real GDP growth turned negative (-0.3 per cent) because of a significant contraction of oil output (-2.8 per cent) due to the implementation of the Organisation of the Petroleum Exporting Countries (Opec) agreement,” it added.