Muscat – Benefiting from higher oil and gas income and strong economic recovery this year, Oman recorded a further RO71mn increase in its budget surplus in August.

The sultanate’s total budget surplus increased to RO1.09bn for the January–August period of 2022 against a deficit of RO1.05bn in the same period of 2021, data released by the Ministry of Finance showed on Wednesday.

Total public income rose 47.3 per cent to RO9.325bn in the first eight months of this year compared with RO6.331bn in the same period a year ago.

The robust growth in total public income was mainly due to higher hydrocarbon revenues and increased current revenue this year, the Ministry of Finance said in its monthly Fiscal Performance bulletin.

As per the ministry’s data, net oil revenue rose by 38.8 per cent to RO4.594bn in the first eight months of 2022, while gas revenues jumped 93.8 per cent to RO2.386bn during the same period.

‘The increase in hydrocarbon revenue is supported by high oil and gas prices and increased production,’ the ministry noted.

Oman’s crude oil was sold at an average price of US$91 per barrel in the first eight months this year compared to US$56 a barrel in the same period of 2021. Daily average oil production was 9.6 per cent higher at 1.047mn barrels per day in 2022 against 955,300 barrels per day in 2021.

With strong revival of economic activities this year the government’s current revenue also grew 32 per cent to RO2.331bn during January – August period against RO1.76bn recorded in the same period of last year.

‘The increase [in current revenue] is attributed to high tax revenue and dividends worth RO584mn received from Oman Investment Authority,” the Ministry of Finance said.

Spending rises 11.5%

Oman’s total public spending reached RO8.235bn during January–August period of this year, an increase of 11.5 per cent over the same period in 2021.

Of the total public spending, current expenditure increased 11.7 per cent to RO6.286bn compared to the same period of 2021, the Ministry of Finance noted. This includes public debt service of RO702mn.

The ministry earlier this year said that the surplus will be utilised for strengthening economic recovery by increasing spending on priority development projects and reducing public debt.

Development spending amounted to RO566mn in the first eight months of 2022 against the same period a year ago, representing 51 per cent of total development spending allocated for the full year 2022.

The Ministry of Finance noted that total contributions and other expenses during January–August period came at RO1.15bn, a sharp rise of 120 per cent compared to RO523mn in the same period of 2021. This increase in spending was mainly driven by subsidies on fuel and food commodities.

‘By the end of August 2022, oil products subsidy and food commodities subsidy amounted to RO498mn and RO11mn, respectively. Additionally, an amount of RO134mn was allocated for future debt obligations budget-item,’ the ministry added.

Positive outlook

The International Monetary Fund (IMF) last week praised Oman’s efforts in reviving the economy after the pandemic. The IMF said that higher oil prices, fiscal consolidation measures and progress on structural reforms are supporting a post-pandemic recovery in the sultanate.

An IMF mission, led by Daniel Kanda, recently conducted discussions in Muscat for the 2022 Article IV Consultation for Oman.

“High oil prices, continued fiscal consolidation under the authorities’ Medium-Term Fiscal Plan, and determined implementation of structural reforms under Oman Vision 2040 are expected to generate fiscal and external surpluses and support higher growth over the medium term,” Kanda said in a statement.

Global credit rating agency Moody’s last week said that a surge in oil prices has generated a large revenue windfall for Oman, turning its large fiscal deficits in the past (averaging 9.6 per cent of GDP during 2014-21) into a material surplus. Moody’s estimates that Oman’s full-year fiscal surplus will be close to 6 per cent of GDP for 2022.

Similarly, S&P too expects that Omani government’s fiscal reform programme and favourable oil prices will support the sultanate’s fiscal metrics through 2023.

‘Omani government has continued to reduce reliance on oil receipts and improve fiscal sustainability, in line with its Medium-Term Fiscal Plan to 2025,’ S&P said in a report earlier this month. The rating agency estimates that Oman will achieve a fiscal surplus of about 6.9 per cent of GDP for 2022.