MUSCAT, APRIL 15
Oman’s Ministry of Finance (MoF) has credited the government’s fiscal stability and sustainability programmes for the dramatic improvement in state finances beset until about a year ago by large deficits and public debt.
It comes as the government settled RO 1.1 billion in loan repayments during the first quarter of this year, effectively paring outstanding public debt to RO 16.6 billion as of end-March 2023, down from a total of RO 17.7 billion as of end-2022.
That repayment, made possible by strong hydrocarbon export earnings and higher non-oil revenues, is also attributable to fiscal reform prioritising, among other things, rationalisation of expenditure to help reduce the annual deficit and progressively bring down the public debt as well.
“The National Programme for Fiscal Sustainability and Financial Sector Development was launched with the aim to continue to implement the measures of fiscal balance, in addition to developing the financial and banking sector by introducing initiatives and projects which help to ensure the achievement of objectives outlined by Oman Vision 2040,” the Ministry said in a statement.
According to the Ministry, fiscal reform has its genesis in the National Programme for Fiscal Balance (Tawazun), which was first unveiled in 2020 to help the country tide over the damaging effects of the global energy crisis spanning the 2014 – 2020 period.
A sharp decline in energy export revenues during this period contributed to higher annual deficits, the accumulation of public debt and rising costs of debt servicing, it noted. Compounding the already challenging financial situation for the country was the outbreak of the pandemic, which worsened Oman’s fiscal position and eroded its credit ratings.
The Medium Term Fiscal Plan (MTFP) launched in October 2020 helped lay the foundations for fiscal sustainability. The goal was to achieve a “fiscal balance between revenue and spending and reducing public debt, in addition to enhancing spending efficiency, diversifying sources of income, and reducing fiscal deficit,” the Ministry said.
Three years on, the Medium Term Fiscal Plan has delivered “significant results”, the Ministry noted. Foremost is its role in slashing the public debt from 69.7 per cent of GDP in 2021 to 46.5 per cent in 2022.
Moreover, the fiscal breakeven oil price has slumped to $68 per barrel for the 2021 – 2025 timeframe compared with an average of $80 per barrel during the preceding 2016 – 2020 period. Additionally, non-hydrocarbon revenues have soared from RO 1.640 billion in 2021 to RO 2.120 billion last year, the Ministry pointed out.
Besides, the MTFP spawned a number of far-reaching initiatives that promise to further strengthen Oman’s fiscal position going forward. They include the establishment of Energy Development Oman (EDO) and Integrated Gas Company (IGC) to oversee the government’s interests in the oil and gas sectors respectively.
Likewise, Oman Investment Authority (OIA) has been established from the consolidation of wealth funds, state-owned enterprises and government stakes in a number of local and international corporations. The goal is to enhance the performance of public investments.
In other initiatives, pension funds are being restructured while a new social protection system is being put in place. Furthermore, a National Register of Assets has been launched to inventory government-owned assets across all economic sectors.
Importantly, the reform measures have also driven a rapid improvement in Oman’s credit ratings by the three main rating agencies S&P Global Ratings, Moody’s and Fitch, the Ministry noted. S&P Global recently revised Oman’s Outlook to positive and affirmed its ratings at "BB", citing financial and economic reforms that have begun to strengthen the resilience of the national economy.