Muscat: Oman’s 2021 Budget seeks to achieve fiscal sustainability, a stable economic growth, and reduce public debt besides creating new job opportunities in the private sector.
Also, the Budget seeks to strengthen the role of private sector in the development process and has been prepared amid several challenges arising due to the COVID-19 pandemic and persistent low oil prices in the international markets. In addition to oil production cut in compliance with OPEC-plus deal and other geopolitical challenges.
The implications of these challenges were reflected in the decline in public revenue, higher deficit, and payment of balance imbalances.
Therefore, the Government took a set of measures to mitigate economic impacts and to stimulate the economic activity besides taking measures to control spending and maintain liquidity.
The Minister of Finance Sultan bin Salem Al Habsi reaffirmed that the General Budget of the State 2021 has been prepared in line with the priorities of Oman Vision 2040 and within the financial framework of the 10th Five-Year Plan (2021/2025).
In an interview to Oman News Agency, the Minister said that a package of initiatives have been taken to improve the financial performance and its sustainability for 2021.
The steps include implementation of the medium term plan initiatives (2020-2024), a study on preparation of the framework of the Public Debt Law and initiation of the common treasury account among other initiatives.
He said that the medium term fiscal balance plan (2020/2024), ratified by His Majesty Sultan Haitham Bin Tarik, aimed to achieve financial sustainability and balance between the public revenues and spending by the end of 2024.
The financial impact of the actions taken in the fiscal balance plan in 2020 amounted to savings of OMR1.4 billion for both the revenues and spending, he said, adding that the financial impact for the actions to be taken in 2021 is expected to save OMR3. 5 billion.
The actions are expected to contribute to reduction of the spending in the budget by some OMR 2.9 billion, he said.
The 2021 General Budget of the State has been established while setting a limit for each government entity that should not exceed the revised budget in 2020 along with implementation of the procedures aimed at rationalising the spending and control of deficit among other objectives.
The 2021 Budget outlines a ceiling for all Government units that the budget of each unit should not exceed the revised budget of FY 2020. The budget continues to rationalise public spending and enhance its efficiency. It also seeks to contain deficit and maintain its downward trend. The 2021 Budget paves the way for Programme Based Budget (PBB), and explores innovative means for funding some Government projects and services.
The deficit is estimated at about OMR2.2 billion i.e. 8 per cent of gross domestic production (GDP). A 73-percent of this deficit will be financed through external and domestic borrowing i.e. OMR1.6 billion, while the rest of the deficit, estimated to nearly OMR600 million, will be covered by drawing on reserves.
Public debt is projected to reach OMR21.7 billion by the end of 2021, and external borrowing represents 76 per cent of overall public debt.
The Government will continue building the infrastructure required to spur economic growth, and giving priority to the highly needed projects that serve economic and social objectives. In addition to expanding the participation of private sector by enhancing its role in implementing and managing some projects and services.
The First Axis is themed “Society Manned By Creative Individuals”. It focuses on education, learning, research, national talents, health, citizenship, identity, heritage, national culture, welfare, social security and youth development.
The Second Axis, themed “Economy Imbedded In A Competitive Environment”, deals with issues of leadership, economic management, economic diversification, fiscal sustainability, the labour market and employment, the private sector, investment, international cooperation, the development of governorates, sustainable cities and information technology.
The Third Axis, themed “Environment Whose Resources are Sustainable”, covers aspects of the environment and natural resources.
The Fourth Axis, themed “A State With Responsible Institutions”, deals with issues of legislation, the judiciary, auditing/monitoring, governance of the State’s administrative apparatus, resources and projects.
In its statement, the ministry said that the preparation of the 10th Five Year Development Plan has been made in adverse, exceptional conditions, including the slump in international oil prices and the coronavirus pandemic. The collapse of oil prices brought about negative impact on human development, global recession, a surge in the general debt vis-à-vis the GDP that pulled down the country’s credit rating and increased the rate of borrowing and caused a decline in the contribution of the private sector to economic activity.
Still, the plan managed to restructure the goals and come up with clear-cut national approaches linked to timed executive programmes. It also restored economic growth, accelerated the rate of economic activities and achieved a balanced ratio of economic and social development through the execution of programmes, initiatives and proposed projects within a comprehensively regulated time frame.
The first stage of preparation of the plan focused on evaluating what was achieved earlier and tapping the outcome of strategies, plans and research made by the state’s sectors, said the ministry, noting that the first stage also included expanding the base of participation and the formation of committee and specialised working teams. The drafting of the plan’s estimates took into consideration the current economic circumstances and the actual fiscal performance of the previous five year plan.
The ministry indicated that, since December 2019 till today, 195 workshops and technical meetings have been held, with the participation of more than 1,900 participants. During this period, the current situation and existing challenges were reviewed. Based on Oman’s 2040 vision, the 10th Five Year Development Plan determined priority goals which outline the features of development over the next five years. It also devised strategic goals, programmes and instruments through which the follow-up and assessment of project results could be realised.
The statement added that the plan seeks to achieve a number of economic and social priority goals with the prime aim of activating the economy, developing macro-economy environment, upgrading the performance of general finance, realising the rationalisation of public spending (particularly recurrent one) and espousing expandable, well-disciplined financial policy that achieves sustainable growth rates.
The plan also targets the setting up necessary infrastructure for the acceleration of private investment and the execution of major strategic projects and public-private sector partnership projects, as well the attraction of direct foreign investment, while at the same time considering prospects for oil prices based on average price of $48 per barrel during the years of the plan. This is in addition to backing the participation of governorates in the achievement of Oman 2040 vision’s goals.
Sector-wise, the plan focuses on economic diversification mechanisms and programmes and raising the contribution of non-oil activities. It sets a 3.2 per cent annual average growth rate of non-oil activities in the GDP by focusing on promising economic sectors like high-tech converting industries, agriculture, fisheries, food processing, transporting, storing and logistics.
The plan also targets increasing the contribution of the private sector to economic activities of high in-country value, the completion of value, production and import chains, the motivation of small and medium enterprises by encouraging innovation, knowledge-based economy, fourth industrial revolution (4IR) applications, artificial intelligence, specialised markets and risk capital and generating decent employment for Omani youth, notably in the entrepreneurship field.
The plan lays great emphasis on protecting human capital and diminishing the repercussions of COVID-19, pressing ahead with the development of the health schema and the sector of medical industries, encouraging the contribution of the private sector to health sectors by providing high-quality services, developing the system of pre-university and graduate education and laying the foundation of administrative, economic and financial decentralisation.
It covers the protection of the environment, the achievement of environmental sustainability, the development of a green and blue economy, increasing the contribution of clean and renewable energy to economic activity and achieving the most ideal utilisation of marine resources.
In its statement, the Ministry of Economy pointed out that the 10th Five Year Development Plan aims to achieve true growth in Gross Domestic Product that is not less than 3.5 per cent during its term, as well as realising 5.5 per cent growth rate by current prices during the years of the plan.
It also targets increasing investment rates to 27 per cent of the GDP, with the aim of raising the efficiency of investment, increasing more direct foreign investment in oil and non-oil sectors to 10 per cent of the GDP by the end of the plan, increasing the contribution of the private sector in investment by the end of the plan and augmenting the contribution of the private sector in investment to 60 per cent, in addition to achieving true growth rate in the growth of non-oil activities by an average of 3.2 per cent.
The employment of national manpower figures among the most formidable socio-economic challenges, said the ministry in its statement, noting that, despite the fact that performance rates of the national economy do provide enough employment opportunities, the labour market could not cope with the steadily increasing number of job seekers.
To address this challenge and to regulate labour market discrepancies, the 10th Five Year Development plan endorses policies that contribute to modifying the structure of employment (which now relies on a wide base of non-skilled manpower) and introducing a new structure based on a wide base of skilled manpower through recruitment of skilled labour and offering it incentives.
The plan is also to encourage new investments based on knowledge-economy, developing the education system and increasing the participation of women in the labour market.
At the conclusion of its statement, the Ministry of Economy explained that the achievement of goals, plans and programmes of the plan is closely associated with the cooperation and collaboration of all government and private establishments, civil society institutions, the media and individuals.
The Ministry of Economy will conduct regular assessment of the 10th Five Year Development Plan, prepare periodic reports and submit them to the departments concerned. The assessment will apply smart performance indicators, follow up programmes and evaluate their effects over the five years of the plan within the framework of a regulated institutional system entrusted to the Vision’s Follow-up Union.
An electronic platform established for this purpose will unify the performance indicators in cooperation with the departments concerned.