Fiscal restraint is the dominant theme of the 2018 State Budget as the Omani government seeks to strike a judicious balance between revenues — constrained by the ongoing downturn — and expenditure, coupled with the need to rein in a ballooning deficit. Yes, despite the expected spending curbs, the Budget reaffirms a commitment to priority national projects and skills development — measures designed to stimulate economic activity and thereby support employment generation for young Omanis, according to a key tax expert.
Alkesh Joshi (pictured), Partner (Business Tax Advisory Services) at multinational professional services firm EY Oman, said the provisions unveiled yesterday as part of the State Budget, underscore an effort by the government to sustain economic growth in the face of tough fiscal challenges.
“The budget reinforces sentiment in the market that the government will continue to take the necessary measures to bolster economic development over 2018. What was anticipated from yesterday’s announcement is broadly in line with the budgetary proposals first unveiled at the Majlis Ash’shura briefing about a month ago,” he added.
The 2018 Budget, ratified by Royal Decree yesterday, projects a three per cent increase in GDP growth in 2018, based on public expenditure aggregating RO 12.5 billion, which is around RO 800 million more than the corresponding figure for 2017.
Revenues are estimated at RO 9.5 billion in 2018 based on an assumed oil price of $50 per barrel versus $45 per barrel a year ago, entailing an increase of 3 per cent over the actual estimated revenues for 2017. The estimated deficit for the year is around RO 3 billion — equivalent to around 10 per cent of GDP — which is proposed to be financed via a mix of internal and external borrowings.
Piquing the interest of financial pundits is a government commitment to spending around RO 3 billion in a number of national projects and strategic initiatives in 2018. This is in addition to allocations amounting to RO 1.2 billion towards ‘development projects’ — provisions characterised as “noteworthy” by Joshi.
“It’s clear that project expenditure will continue to be prioritised in 2018. Only key projects that are of national economic importance will be funded by the government, while non-essential projects will be put on the back burner for now,” he observed.
An example of a project of national significance, the tax expert said, is the new Duqm Refinery which is being developed by a 50/50 partnership of the Omani and Kuwaiti governments. “Going forward, the government will look for strategic partnerships with key investing countries, so funding for key projects continues to flow in.