Oman keeps spending steady as oil prices soften

Oman’s mid-year fiscal snapshot tells a simple story with important implications: in a world of cooling oil prices and uneven global growth, the government is keeping its priorities straight — protecting people, paying its bills on time and pressing ahead with development projects that underpin Vision 2040. That mix of prudence and purpose deserves support.
Start with the context. By the end of Q2 2025, the general budget recorded a modest deficit of RO 259 million as public revenue reached RO 5.839 billion against spending of RO 6.098 billion. Hydrocarbon receipts softened as the realised oil price averaged $75 per barrel and production averaged 988,000 barrels per day. In short, revenues dipped 6 per cent year-on-year, while spending rose 5 per cent — and yet the policy signals are reassuring.
Where did the money go? Precisely where most citizens would expect in a tightening cycle: social sectors and basic services. By mid-year, RO 3.122 billion had been channelled into security and social welfare (52 per cent), education (21 per cent), health (19 per cent) and housing (8 per cent). This is not rhetorical prioritisation; it is budgetary fact, and it aligns with Vision 2040’s human-capital pillar.
Crucially, the state did not retreat from growth-enabling investment. Development expenditure by ministries and government units reached RO 688 million by Q2 — already 76 per cent of the RO 900 million allocated for the full year — reflecting an accelerated pace of ongoing projects. That is the opposite of 'stop-start' capital policy; it is a deliberate choice to keep construction sites active, supply chains engaged and local job multipliers alive even as oil softens.
The second pillar of confidence is liquidity support to the real economy. The Ministry of Finance reports more than RO 749 million paid to private-sector suppliers by the end of Q2, with fully documented dues settled within an average of five working days. For SMEs and contractors, days matter more than months; predictable cash flow is the difference between hiring and downsizing, between investing and stalling.
Third, debt management remains disciplined. Public debt stood at RO 14.1 billion at the end of Q2, down from RO 14.4 billion a year earlier, after repayments of outstanding obligations. In a region where debt trajectories can swing with commodity cycles, chipping away at liabilities — even modestly — signals that fiscal sustainability is not a slogan. It is being executed.
What about subsidies — the most sensitive line item when households feel price pressures? The evidence points to a calibrated, citizen-first approach. Allocations by mid-year included RO 339 million to the electricity sector, RO 289 million to the Social Protection System, RO 44 million for oil products and RO 111 million for water and wastewater. The strategy is not blanket largesse; it is targeted cushioning to manage volatility and protect the most vulnerable while maintaining incentives for efficiency. That balance — compassion with constraints — should be encouraged, not politicised.
Sceptics may ask: why not cut harder and faster if revenue is down? The answer lies in credible forward planning. The bulletin cites a global outlook of 3 per cent growth in 2025 and 3.1 per cent in 2026, with inflation still easing. Oil, however, is projected to average $69 in 2025 and $58 in 2026. In other words, the external engine is not set to roar; it may hum. In such a landscape, slashing development would be short-termism. Preserving essential investment while keeping debt stable and prioritising social sectors is the more responsible path.
There are also signs that diversification is slowly but steadily working. Current (non-hydrocarbon) revenue ticked up 2 per cent year-on-year to RO 1.928 billion, even as oil and gas receipts cooled. Meanwhile, GDP at constant prices rose 2.5 per cent year-on-year in Q1 2025. These are incremental gains, not a transformation — but they are moving in the right direction, and they validate a policy mix that resists panic and backs productivity.
None of this implies that choices are cost-free. A mid-year deficit still requires financing; capital projects must be vetted for economic rate of return; and targeted subsidies must remain precisely targeted. But a deficit of RO 259 million at mid-year, alongside active debt reduction and on-time supplier payments, is hardly a red flag. It is an investment-through-the-cycle stance that aims to avoid the deeper social and economic costs of austerity whiplash.
What should policymakers double down on in H2?
First, keep the subsidy architecture targeted and data-driven. As electricity and water demands grow with population and industry, gradual stabilisation paired with smart meters and consumption bands will protect households while nudging efficiency. The mid-year allocations show the framework is in place; the task now is continuous refinement.
Second, sustain the “five-day” payment discipline as a non-negotiable KPI. If anything, expand e-invoicing and supplier portals so SMEs see status in real time. Liquidity certainty is a no-cost stimulus that feeds directly into private investment.
Third, use the fast pace of development execution to lock in productivity: prioritise logistics links, utility upgrades, digital infrastructure and human-capital projects with high multiplier effects. The fact that 76 per cent of annual development allocations were already executed by Q2 suggests implementation capacity is strengthening — an asset Oman should leverage.
Fourth, broaden the base of non-oil revenue without burdening growth sectors. The quiet 2 per cent rise in current revenue is welcome; the next leg should come from compliance, digital tax administration and service-fee rationalisation, not blunt increases that risk competitiveness.
Finally, communicate the medium-term fiscal track clearly. Markets, businesses and families plan better when they understand the glidepath for deficits, debt, and development outlays under different oil scenarios. The bulletin already embeds that transparency; regular, accessible updates anchor expectations and reduce noise.
Oman’s fiscal story at mid-2025 is not about headline-grabbing surpluses. It is about policy maturity — choosing continuity over reaction, people over politics and long-term competitiveness over quick wins. In a softer oil world, that is exactly the kind of stewardship we should support.

The writer is the head of business and politics section at Oman Observer