Oman attempts to diversify revenue away from oil

23 Oct 20

The Omani Sultan has approved a medium-term fiscal plan in the hope of balancing the country’s public finances and decreasing its dependence on oil revenue.

 

Covid-19 and low oil prices increased the Gulf state’s budget deficit by more than 25% in the first six months of this year, up from 660.6m rials (£1.31bn) to 826.5m rials (£1.64bn), after revenues fell faster than expenditure.

Oil and gas sales provide the central government with most of its income, making up 79% of revenue in 2018 according to the IMF.

The fiscal plan covers the period 2020-24 and, according to the state-run Oman News Agency, is intended to reduce public debt, make spending more efficient, increase the state’s reserves and improve the return on government assets – as well as diversifying revenue away from oil.

Sultan Haitham has also ordered the creation of a social protection system “with the aim of ensuring that low income people and families on social security are protected” from the effects of implementing the fiscal plan.

Oman’s debt has shot up in recent years, from around 5% of GDP at the end of 2014 to around 60% at the end of last year.

Ratings agency S&P Global has estimated this could rise to 84% by the end of 2020.

Oman raised $2bn in an international bond sale this week, just days after S&P reduced its debt rating for the second time this year.

The state plans to introduce income tax for high earners, according to the bond prospectus.

Last year the IMF urged Oman to introduce value-added tax and other sources of revenue “that place more of the adjustment on those who can best shoulder it”.

Did you enjoy this article?

Related articles

Have your say

Newsletter

CIPFA latest

Most popular

Related jobs

Most commented

Events & webinars