Zero borrowing for Oman by 2024

Muscat: Oman’s net borrowing is expected to reach zero in 2024, thanks to measures taken to reduce the county’s fiscal deficit and diversify its economy, according to a report by the International Monetary Fund (IMF).

The report was published after a staff visit led by Daniel Kanda, senior economist at the IMF, to assess the plans drawn up by the country to in the light of the economic developments and future outlook owing to the COVID-19 pandemic.

According to the economic indicators published by IMF, Oman’s estimated net borrowings are expected to reach just $0.1bn by 2024.

Plans to adjust the fiscal deficit and encourage more businesses to set up operations in Oman, said Dr Ahmed Al Hooti, the head of research at the Oman Chamber of Commerce and Industry, are part of the country’s plans to ensure long-term stability.

“The reduction of deficit is being met through two main plans: The first is the medium-term fiscal plan, and the second is the economic stimulus package that was launched last week,” he said. “Together, these plans will help reduce expenses and boost revenue, which is needed during these tough times.

“I think 2021 and 2022 will still be a little bit tough…we can begin to see improvement during the second half of this year, and after that, the impacts of these measures will be seen,” added Al Hooti.

“Oman has taken a number of measures to help businesses and invite foreign investors to come here, because it knows the importance of having a strong economy that is not dependent on only one or two sectors.

“There might have been some countries that would not have had the resolve to take the required measures, but Oman is committed to diversification and reducing the deficit,” he added.

“This is why there are incentives such as long-term residency for investors, foreign ownership of land and companies, reductions in fees and taxes for companies involved in diversification, and many others.”

IMF said in its report: “The fiscal adjustment plan (Tawazun) targets the elimination of the fiscal deficit over 2021-25 by boosting non-oil revenues while keeping nominal fiscal expenditures broadly constant. To improve public asset management, the government established the Oman Investment Authority (OIA) with a mandate to strengthen the governance and efficiency of public enterprises. 

“Also, a new holding company—Energy Development of Oman (EDO)—was created to manage and finance government investments in oil, gas, and renewables,” the body added.

IMF continued: “Areas for reform, in line with Oman Vision 2040, include restructuring public administration, strengthening governance of state-owned enterprises, improving the flexibility of labour markets, and strengthening corporate restructuring mechanisms. Well-designed social safety nets would also support the reallocation of labour toward expanding sectors as economic diversification proceeds.”

“Oman is a good base for businesses that are looking to export to the wider Middle East, the Indian subcontinent, and Africa,” said Nalin Chandna, the CEO of National Gas Company.

“Unlike many individuals, when a company looks to invest in a country, it is not looking to pull out after six months or one year, but are instead looking at long-term solutions over a decade or so.

“In that way, the startup costs for companies in Oman are rather low, this is a country that is looking to diversify, so it is encouraging businesses to come here by providing them a number of sops,” he added.

“Let’s not forget that Oman also has a fantastic infrastructure, as well as a young population that is looking to work. All of these are positives for investors.”

Sarweshwar Biyani, the Vice President of finance and accounts at SV Pittie Sohar Textiles FZC, also said the combination of controlled public expenditure and an efficient economy outlined in the government’s plans would help reduce the deficit.

“The government will control its development expenditure also, with its focus being to maintain critical infrastructure and prioritise new projects that are essential for the national development objectives,” he said.“This initiative allows for cost saving opportunities, enabling the public sector to reduce its overall expenditure bill.

“Important expenditure reduction measures include controlling the wage bill through reforms, developing strong procurement expertise for cost optimisation, and the redesigning of and reallocating subsidies to make sure they benefit those who need them,”he added.