Some countries in the world used to record deficits in their annual financial budgets to achieve their financial and economic objectives, notably by obtaining loans from international financial institutions and regional banks, as well as giving the impression that the state could not implement all the projects and items included in the annual programmes of its official institutions.
As is well known, the deficit is the negative number in any state's general budget, with expenditures exceeding revenues. This means that the state will need to borrow to cover the expenses, unlike a surplus budget, where excess funds go to a reserve or a sovereign fund in that country.
Preliminary estimates of Oman 2023 Budget indicate that total public revenues are projected at about RO 11.650 billion ($30.29 billion), an increase of 10 per cent over the 2022 budget, while the volume of public spending is expected to reach about RO 12.950 billion ($33.67 billion) with an increase of 7 per cent of the 2022 budget. Thus, the deficit will reach RO 1.3 billion ($3.38 billion), which constitutes 11 per cent of total revenues and 3 per cent of GDP.
The good thing about the budget is Oman’s expectations to increase its average oil production quantity to 1.175 million barrels per day, at an average price of $55 per barrel, which is the price that was recorded in the current year 2022 budget, in order to hedge against any shocks to global oil prices due to variables and geopolitics in the world. It was possible to increase the average price of Omani oil by another $10, i.e. by $65, to eliminate the deficit item in light of the recent numbers of the average selling price of a barrel of oil, which recorded between $75 and $90 in the past 11 months of this year.
However, the Omani government takes into account future expectations in the event of a decline in the price due to some circumstances, and to the ambiguity surrounding future expectations about the performance of the global economy, at a time when countries are likely to enter into a global recession and inflationary stagnation, in addition to the continuation of the Russian-Ukrainian war, and to instability of global supply and demand rates for oil production and prices in general.
Oman also takes into account all these reasons and directs the increase in oil prices to pay off the public debt, which has increased since 2014 as a result of the increase in salaries, but the debt has been reduced over the past years to reach 43 per cent, equivalent to RO 17.7 billion ($46 billion) in 2022.
Oman is still considered one of the countries that have external debt, as it is estimated that the volume of public debt will reach RO 18.6 billion ($48.36 billion) by the end of 2023, at a time when the state continues to manage its lending portfolio to reduce it, and enhance its ability to face financial challenges. It also works to reduce the cost of servicing the public debt with the aim of improving its credit rating, diversifying its sources of income, and promoting its economic growth, in addition to allocating new funds to finance upcoming development projects.
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