Oman’s deficit fell by 67% in Jan-May period of 2019
Driven by a slew of steps taken by the government to cut expenditure, increased earnings and a better management of resources helped Oman to achieve a whopping 67.3 per cent reduction in its budgetary deficit for the first five months of the current year, data released recently by the government showed.
As per the data, Oman’s fiscal deficit for the period between January-May this year stood at just RO358.4mn, which is the lowest shortfall for the first five months period in any calendar since 2014. The sultanate had a budgetary deficit of RO1.09bn in the corresponding period a year ago.
An improvement in budgetary deficit along with a decent rise in revenues prompted Fitch Ratings to affirm ‘BB+’ rating to Oman along with a stable outlook earlier this month.
Oman’s revenue in the first five months of this year rose by over 15 per cent to RO4.72bn compared to RO4.091bn in the same period of last year, the data showed.
According to Fitch Ratings, the government’s rise in revenue was supported from the extra income generated from the commencement of production at the Khazzan project, and going forward there could be further increase in the revenue as second phase of khazzan gas project is progressing well and it is also likely to contribute in overall economic growth of the country.
‘There is significant potential for higher growth and government revenue from new hydrocarbon projects, which will be critical to stabilising public and external finances. Phase 2 of the Khazzan gas field could start producing in 2021, adding a further 0.5bn standard cubic feet (scft) per day of capacity after the 1bn scft per day addition from Phase 1 in 2017-2018,’ Fitch Ratings said in a note while affirming Oman’s rating.
To further boost the income from the gas sector, the government earlier this year announced the signing of interim agreements with Shell and Total for the development of the Mabrouk field. The government has also signed agreements with Shell and Total for the construction of a new gas-to-liquids plant at Duqm and an LNG bunkering facility in Sohar. All these steps are likely to augment the earnings of the government in the future.
Besides increasing revenue, the government has also taken various steps to curtail expenditure. As per the data, the total expenditure by the government in the first five months of 2019 stood at RO4.62bn, which is 4.3 per cent lower than RO4.83bn expenditure incurred by the government in the same period a year ago.