Oman’s Budget 2023, ratified by His Majesty Sultan Haitham bin Tarik last week, is primarily focused on achieving financial efficiency and fostering economic growth, according to well-known consulting, assurance, tax and transaction services firm EY.
The multinational professional services network has hailed the budget as a judiciously-crafted fiscal blueprint that seeks to safeguard the Omani economy from inflationary pressures, geopolitical developments and other risks imperiling the global economy during 2023.
In remarks to the Observer, Alkesh Joshi (pictured), Tax Partner, Oman Tax Leader and MENA Energy & Sustainability Tax Leader at EY, characterized the General Budget for the year as “a very well thought-out balanced fiscal budget for 2023”.
“The budget is designed with sufficient caution in predicting revenues on a conservative basis given the expected turbulence in the global markets in 2023 and at the same time focusing on achieving financial efficiency and fostering economic growth,” Joshi said.
A common theme running throughout the General Budget for Fiscal 2023 is the government’s emphasis on fiscal efficiency as a key underlying objective behind a flurry of programmes and initiatives unveiled to this end since 2020. This is reflected in the recently launched National Programme for Fiscal Sustainability and Financial Sector Development, designed to ensure that the financial sector is a key enabler for investment and economic growth. It supplants the National Program for Fiscal Balance, which was designed to achieve reduction in public debt and improvement in credit rating.
In line with this dominant theme, the 2023 Budget is based on an average oil price assumption of $55 per barrel, thereby helping provide a robust hedge against oil price volatility, EY points out. In comparison, the assumed price for 2022 was $50 per barrel although the actual average oil price for Oman crude was $94 per barrel during the year. Furthermore, oil production averaged 1.055 million barrels per day in 2022, which was higher than the projected daily production of 1.051 million barrels.
Significantly, hydrocarbon revenue will account for 67 per cent of total budgeted revenue or RO 10.050 billion for 2023. This compares with budgeted revenue of RO 10.580 billion in the 2022 Budget, although actual revenue soared to RO 14.23 billion on the back of buoyant oil and gas prices.
Helping supplement oil and gas revenues this year is a projected uptick in non-oil earnings, says EY in its explainer on the 2023 Budget. Tax revenue is projected at RO 1.15 billion, which is approximately 11 per cent of the total revenue. This comprises corporate income tax revenue budgeted at RO 0.56 billion, and excise and value-added tax (VAT) revenue estimated at RO 0.59 billion. “This highlights the increasing significance of tax revenue in the State’s budget,” EY noted.
The overarching goal, EY explains in its report, is to sustain the State’s ability to meet its financial obligations. “This is expected to lead to expansion in economic stimulus policies and development of social protection system to cater to the welfare of citizens. Looking ahead, all Government entities are required to review their spending to reduce expenditure, while maintaining the quality of service delivery,” it added.