Thursday, December 02
02:02 AM

Sultanate’s budget deficit swells to RO4.2bn in 2020

3 Jan 2021

As the COVID-19 pandemic and continued low oil prices triggered tremendous challenges for Oman’s economy and public finance, the sultanate’s budget deficit sharply increased to RO4.2bn for the full year 2020 as compared to RO2.5bn total deficit estimated in last year’s budget.

The preliminary results of 2020 budget showed a sharp decline in Oman’s total revenue that led to a higher deficit. As per the Ministry of Finance’s statement issued on Saturday, the sultanate’s total revenue in 2020 fell by 21 per cent to RO8.5bn as against the budgeted figure of RO10.7bn. Total public spending in 2020 declined by 4 per cent to nearly RO12.7bn as compared with RO13.2bn in the 2020 budget estimates.

‘The 2020 budget faced dual challenges of lower oil prices and economic and financial implications triggered by the COVID-19 pandemic. The 2020 budget deficit is projected to reach nearly RO4.2bn, up by RO1.7bn than the estimated deficit of RO2.5bn in the 2020 budget. This is attributed to the implications of COVID-19 and sharp drop in oil prices,’ the Ministry of Finance said in its statement.

Oman’s 2020 general budget was based on an average oil price of US$58 per barrel, but the actual average oil price during the year remained as low as US$48 per barrel. 

The country’s oil revenues declined by RO1.1bn due to average oil price being significantly lower than the assumed price in the budget by US$10 per barrel. Oman’s oil revenues in 2020 decreased to RO5.5bn, nearly 21 lower than the estimated oil revenues in the budget. Gas revenue also dropped by RO500mn as a result of a decline in natural gas price as well as lower sales.

According to the preliminary 2020 budget results, non-oil revenues declined by RO600mn compared with the budget estimate due to the impacts of the COVID-19 pandemic. To mitigate the effects on the economic activity, the government waived several fees and taxes (such as tourism tax, municipality fees and tax, industrial areas rents, commercial register renewal fee, shipping and handling fees and others), which helped fuel the decline in non-oil revenue.

Oman’s budget deficit in 2021 is estimated at about RO2.2bn or 8 per cent of gross domestic production (GDP). A 73-per cent or RO1.6bn of this deficit will be financed through external and domestic borrowing, while the rest of the deficit (nearly RO600mn) will be covered by drawing on reserves.

With rising deficits in recent years, the sultanate’s total public debt is projected to reach RO21.7bn by the end of 2021, and external borrowing represents 76 per cent of overall public debt, the Ministry of Finance said.

© 2021 Apex Press and Publishing. All Rights Reserved. Powered by Mesdac