MUSCAT: The Ministry of Finance has affirmed that the average price of oil barrel was calculated at $55 in the State Budget for fiscal year 2023. The estimate is in line with the principle of hedging in accordance with the state’s financial policy.
The calculation takes into account potential fluctuation in global prices that might occur as a result of unstable geopolitical events. It also seeks to offset any uncertainty of future expectations about the performance of the global economy.
Through the "Guide to the State Budget for Fiscal Year 2023", issued on Monday, the ministry pointed out that total revenues approved in State Budget 2023 were estimated at RO 10.050 billion, down by 5 percent from estimates endorsed in State Budget 2022.
The decline was due to a projected decrease in gas revenues registered in State Budget 2023 following the establishment of the Integrated Gas Company (IGC) with a view to realizing a number of goals. These include the improvement of Oman’s fiscal performance indicators by removing gas purchase and transport expenses from the State Budget and transferring the net revenues from gas sales to the state treasury.
In State Budget 2023, oil revenues were estimated at about RO 5.320 billion, registering an increase of 18 percent, compared to the endorsed Budget 2022, as oil revenues constitute about 53 percent of total general revenues.
Gas revenues in State Budget 2023 were estimated at RO 1.4 billion, thanks to the establishment of Integrated Gas Company, which will purchase and sell gas and then transfer gas revenues directly into the treasury. Gas revenues constitute 14 percent in the revenues.
Non-oil revenues in the endorsed State Budget 2023 are estimated at about RO 3.330 billion, down by 0.3 percent from Budget 2022 estimates.
Current revenues in State Budget 2023 are estimated to stand at about RO 3.280 billion. Of these, revenues from value-added tax (VAT) and excise tax are estimated to be about RO 590 million, while income tax revenues (on profits of companies and institutions) are estimated to be about RO 560 million. Revenues from the distribution of dividends from the Oman Investment Authority (OIA) are expected to stand at about RO 800 million, while revenues from government service fees are set to be about at 1.330 billion.
Aggregate revenues and capital returns from State Budget 2023 were estimated to be about RO 50 million.
Budget 2023 is in pursuance of the government’s efforts to implement policies aimed at developing the management of the general finance and upgrading the efficiency of spending.
Hence, spending was estimated according to a set of variables. These include estimating the expenditures of civil ministries in accordance with the actual needs of all civil units, calculating employees’ periodic allowance and promotions of employees who are 2012 seniors, as stipulated by Royal orders. The estimate also comprises financial control procedures and the outcome of government departments’ initiatives to cut down public spending. The exclusion of expenses for purchasing and transporting gas as a result of establishment of the Integrated Gas Company also plays a role in the estimates.
Therefore, the volume of spending in Budget 2023 is estimated at about RO 11.350 billion, down by 6.4 percent from spending endorsed in State Budget 2022.
Current expenditures in State Budget 2023 were estimated to be RO 8.620 billion distributed as follows: 35 percent as defence and security expenditures, 51 percent as expenditures of civil ministries and 14 percent as public debt service.
The allocations of the “ministries and government units spending item” in State Budget 2023 were raised by 2.7 percent—estimated to be about RO 4.420 billion, including the cost of periodic allowance for employees and promotions of employees who are 2012 seniors.
In the item of public debt service expenses, sum of RO 1.2 billion was endorsed by calculating the expected interest payments on existing and planned loans for 2023.
The approved budget for 2023 allocated sum of RO 900 million for development projects, distributed as follows: 6.7 percent for the commodity production sector, 10.8 percent for the service production sector, 29.3 percent for the social segments sector, 42.1 percent for the infrastructure sector, and 11.1 percent for other sectors.
Spending on contributions and other expenditures in the 2023 budget was estimated at about RO 1.830 billion, which constitutes about 16 percent of the total public spending.
It is worth noting that two items were introduced (projects with a developmental impact) with sum of RO 200 million and (supporting the social protection system) with sum of RO 384 million
The total endorsed spending in the state’s general budget for the fiscal year 2023 for social and basic sectors amounted to about RO 4.3 billion, or 38 percent of the total public spending, distributed as follows: 44 percent for the education sector, 22 percent for the social security and welfare, 12 percent for the housing sector, and 22 percent for the health sector.
The estimated deficit in the 2023 budget is expected to reach about RO 1.3 billion, which means 13 percent of total revenues and 3 percent of GDP.
It is planned to finance the deficit of RO 900 million through internal and external borrowing, and about RO 400 million through withdrawals from reserves.
The Sultanate of Oman will not resort to borrowing and withdrawing from reserves to finance the 2023 budget deficit in the event of an increase in public revenues and the realization of additional financial revenues, especially the increase in the average price of a barrel of oil compared to what is endorsed according to the principle of hedging by $55 per barrel. The government may borrow to refinance government loans and replace them with low-cost loans.
Regarding the investment spending, the volume of investment spending financed by Oman Investment Authority (OIA) in the 2023 budget was estimated at about RO 1.9 billion, while the contribution of the Energy Development Oman (EDO) in investment projects for oil and gas production was estimated at RO 1.5 billion.
On the other hand, preliminary results indicated that the state's general budget for the fiscal year 2022 witnessed remarkable positive development. The financial performance of the budget improved, recording an increase in revenues by 34.5 percent compared to what was endorsed at the beginning of 2022, with expectations of achieving a financial surplus of about RO 1.146 billion compared to an estimated deficit at the beginning of the year of about RO 1.550 billion.
Public revenues for the 2022 budget recorded about RO 14.234 billion, compared to what was endorsed at the beginning of the year, which amounted to RO 10.580 billion.
This rise is mainly attributed to the surge in average oil prices achieved to about $94 per barrel, compared to $50 per barrel approved in the budget, and the increase in oil revenues by 66 percent, to reach about RO 7.457 billion, and total gas revenue by 29 percent, to reach about RO 3.557 billion.
The preliminary results of the financial performance for the 2022 indicated that a financial surplus of about RO 1.146 billion was achieved. Therefore, the government did not resort to borrowing and withdrawing from reserves to finance the deficit, which is estimated at about RO 1.550 billion as approved in the 2022 budget.
The 2022 budget achieved additional financial revenues as a result of the rise in global oil prices. This contributed to accelerating economic recovery and improving financial and economic indicators, by directing these additional financial revenues towards managing the lending portfolio, reducing public debt, enhancing social spending, and stimulating economic growth.
The additional financial revenues enabled the government to pay off part of the public debt and manage the lending portfolio. This contributed to reducing the total volume of public debt from RO 20.8 billion at the end of 2021 to RO 17.7 billion in 2022. The public debt ratio decreased in 2022 to reach about 43 percent of the GDP compared to the percentage estimated in the Medium-Term Fiscal Plan (83 percent). (ONA)