Muscat: Over the past few years, the national economy experienced frequent fiscal challenges posed by a sharp drop in oil prices, lower oil demand, high public debt, and the implications caused by the Covid-19 pandemic.
These challenges have adversely affected the Sultanate of Oman’s creditworthiness and borrowing cost.
Moreover, the Sultanate of Oman was recently hit by the tropical cyclone “Shaheen”, which took a toll on the community and infrastructure of some wilayats (cities). However, with the efforts put by the government entities and members of society, life has returned to normal.
Therefore, the 2022 Budget draft was prepared, while taking into consideration the existing challenges, in line with the Tenth Five-Year Development Plan (2021-2025) which reflects the first plan of Oman Vision 2040.
The fiscal sustainability and stimulus of economic diversification sectors are among the top priorities.
Economic and Social Objectives of 2022 Budget
The State’s General Budget for FY 2022 is consistent with the objectives of the Tenth Five-Year Development Plan. The 2022 Budget aims to achieve a set of economic and social development objectives, summarised as follows:
m Maintaining prudent and sustainable levels of public spending.
m Enhancing the contribution of non-oil revenue to total public revenue.
m Giving priority to establish projects that are linked to productive sectors.
m Giving priority to complete the programme of digital transformation.
m Maintaining the level of spending on basic services.
m Redirecting government subsidies to targeted low-income households.
m Continue improving the Sultanate of Oman’s credit rating and increase investors’ confidence.
m Continue supporting training programmes and training linked to jobs schemes, and boost job creation.
m Continue supporting small and medium enterprises (SMEs).
2022 Budget Estimates
Public revenues and expenditures have been estimated after taking into account the MTFP, as well as a set of bases and scenarios, which all aim to ensure the continuation of basic services delivery such as education, healthcare, housing and social welfare. In addition to improving the business environment and investment climate.
As a precautionary measure, the oil price was assumed at the price of $50 per barrel in the 2022 Budget.
Public Revenue
Revenue estimates are based on the following considerations:
The 2022 Budget assumes an oil price of $50 per barrel.
Transferring proceeds from selling 20,000 thousand oil barrels per day to the Oil Reserve Fund.
Oil production is projected to be 1,055 thousand barrels per day.
Therefore, aggregate revenue is estimated at RO 10,580 million in 2022. Oil and gas revenue is estimated to amount to RO 7,240 million, accounting for 68 per cent of total revenue. Furthermore, non-hydrocarbon revenue is estimated at RO 3,340 million
Hydrocarbon Revenue
Net Oil Revenue
Net oil revenue is projected to amount to RO 4,490 million i.e. 42 percent of total revenue, down by 19 percent compared to the preliminary results of 2021.
Gas Revenue
Gas revenue is estimated to stand at RO 2,750 million i.e., 26 percent of total revenue, up by 5 percent compared to the preliminary results of 2021.
Non-hydrocarbon Revenue
The non-hydrocarbon revenue is projected to reach RO 3,340 million in 2022 i.e., 32 percent of total revenue, up by 21 percent compared to the preliminary figures of 2021.
Current Revenue
The current revenue is anticipated to amount to RO 3,160 million in 2022. Excise tax and VAT revenues are expected to stand at RO 535 million in 2022. Moreover, corporate income tax revenue is estimated at RO 465 million in 2022.
Government revenue from Oman Investment Authority (OIA) is estimated at about RO 800 million in the 2022 Budget. The remaining current revenue is projected to be around RO 1,360 million in 2022.
Capital Revenue and Repayments
Capital revenue is expected to amount to RO 170 million in 2022, while capital repayments are anticipated to be around RO 10 million in 2022.
Public Spending:
In light of the policies adopted by the government to enhance spending efficiency and in line with the initiatives undertaken in 2021, public spending for 2022 Budget was estimated based on the following considerations:
- Expenditures of government units, including periodical allowances and 2011 batch promotion costs, taking into account the financial impact of fiscal measures.
- Allocations for gas expenditures will be in accordance with the expected cost.
- Allocations of electricity subsidy, taking into account the subsidy reform outcomes.
- Allocating subsidies for the water sector, sewage, and the waste sector as per the estimates made by the relevant entities.
- Subsidies allocated for the transport sector as per estimated cost.
- Cost of public debt service in accordance with the existing loans and the planned ones over the year.
- Allocating an amount of RO 200 million for future obligations budget-item.
Public spending is estimated to amount to RO 12,130 million in 2022 compared to RO 12,167 million as indicated by the 2021 preliminary estimates, increasing by RO 37 million i.e. 0.3 percent.
Expenditure Composition in 2022 Budget:
Current Expenditure: RO 10159 million ( 84 percent)
Investment Expenditure: RO 900 million (7 percent)
Subsidy and Other Expenses: RO 1071 million (9 percent)
Current Expenditures of Defence and Security
Current expenditures of defence and security are estimated at RO 2,965 million, accounting for 29 percent of total current expenditures.
Current Expenditures of Ministries and Government Units
Current expenditures of ministries and government units are estimated at RO 4,300 million, in accordance with the following:
1) Actual needs of all government civil units.
2) Outcome of fiscal consolidations and government initiatives geared towards spending reduction.
3) Salary appropriations of government units allocated as per the occupied posts, totalling RO 3.2 billion i.e., 74 percent of current expenditures of ministries and government units.
Spending on basic services:
The 2022 Budget is set to maintain the same level of spending on social services by 40 percent of total current expenditure, as follows:
Education --- 17 percent
Social welfare --- 7 percent
Housing --- 5 percent
Healthcare --- 11 percent
Development Expenditures
Spending on development projects is estimated at RO 900 million in the 2022 Budget, representing the estimated amount to be paid during the year as per the actual work in progress for the projects. The development projects have been reprioritized in terms of their urgency, cost, and economic and social return, using the Matrix of Projects developed by the Ministry of Economy.
Tenth Five-Year Development Plan (2021-2025): Projects Matrix
The Ministry of Economy has developed a matrix to identify sectoral and project priorities for the Tenth Five-Year Development Plan to ensure social and economic return. In addition to capturing the repercussions that would contribute positively to the national economy and serve the social aspect. This can be illustrated as follows:
A clear mechanism for evaluating the priority of projects selection to meet the current and future requirements in line with Oman Vision 2040 and achieving the objectives of the Tenth Five-Year Development Plan.
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