Muscat – Oman’s budget deficit and government debt rose sharply in 2020 but are projected to improve considerably over the medium-term with the implementation of the sultanate’s Medium-Term Fiscal Balance Plan, the International Monetary Fund (IMF) said.
‘The sultanate’s fiscal deficit widened to 19.3 per cent of GDP in 2020 but it is projected to decline to -2.4 per cent in 2021 and a surplus in 2022,’ the IMF said in a statement on Sunday. The executive board of the IMF has concluded the Article IV Consultation with Oman.
According to the IMF, Oman’s central government debt rose to 81.2 per cent of GDP last year but is expected to decline sharply over the medium term.
‘Fiscal consolidation and higher oil prices are projected to narrow the current account deficit to -6.2 per cent in 2021 and -0.6 per cent in 2026,’ it said.
As per the IMF’s estimates, Oman’s real GDP – which contracted by 2.8 per cent in 2020 – is expected to grow by 2.5 per cent this year and by 2.9 per cent in 2022.
The fund, however, said that there are substantial uncertainties around the outlook, with downside risks dominating.
‘On the downside, COVID-19 variants would prolong the impact of the pandemic. Tighter global financial conditions could worsen the fiscal and external positions.’
‘On the upside, a strong rollout of vaccination, higher oil prices, and continued implementation of structural reforms would considerably improve the outlook,’ the IMF added.
The executive directors of the IMF commended the Omani authorities’ swift and well-coordinated policy actions to address the health and economic effects of the COVID-19 pandemic.
Looking ahead, the IMF emphasised that the sultanate’s macroeconomic policies should remain supportive until the recovery is fully entrenched and underscored providing additional time-bound and targeted policy measures for hard-hit sectors and households if needed.
‘The directors welcomed recent progress in structural reforms aiming at boosting non-hydrocarbon sector growth and supporting external sustainability. Priority should be given to improving flexibility in the labour market, promoting employment in the private sector, and further encouraging female labour participation,’ the IMF said.