MUSCAT: Sultan bin Salim al Habsi, Minister of Finance, said that the State General Budget for Fiscal Year 2021 has been prepared in such a manner as to be compatible with the priorities of Oman Vision 2040 in accordance with the financial framework of the 10th Five-Year Plan, taking into consideration the main objectives and trends aimed at achieving fiscal sustainability, reducing public debt and achieving economic growth rates that contribute to the employment of nationals and continue to reinforce the role of the private sector in the development march.
In an interview with Oman News Agency (ONA), the minister said that a package of initiatives has been adopted with the aim of improving and sustaining financial performance for 2021, boosting economic growth in line with the government’s aim to achieve in medium and long terms fiscal balance.
This includes continuation on the implementation of the Medium-Term Fiscal Balance Plan (2020-2024) initiatives, studying the preparation of a general framework for the Public Debt Law in addition to setting up the unified treasury account and complementing the implementation stages of balancing programmes and performance and rolling out a tender for unified government financial system.
The minister added that the government’s plan for 2021 encompasses several measures aimed at enhancing economic incentives promulgated by His Majesty’s Royal directives. These incentives are hoped to create job opportunities. These incentives are housing loans provided by Oman Housing Bank, distribution of residential plots for citizens, exempting borrowers from Oman Development Bank and Authority for SME development from loan interests for one year (2021), exemption from licence fees for small and medium enterprises for one year (2021), reducing rental agreement fees to 3 per cent from 5 per cent.
The minister affirmed that, beside these economic incentives, the government seeks to issue a set of measures related to regulating the labour market and incentivising the business climate.
Al Habsi explained that the Medium-Term Fiscal Balance Plan (2020-2024), which earned the Royal blessing of His Majesty Sultan Haitham bin Tarik, aims at achieving financial sustainability and fiscal balance between revenues and expenditures by the end of 2024, creating financial conditions supportive of the launch of Oman Vision 2040. He noted that the Sultanate seeks to avoid the continuation of financial deficits and the declining credit rating.
Oman Vision 2040 key to diversification
The priorities of Oman Vision 2040 related to the Sultanate’s financial strategy represented by economic diversification, financial sustainability, the private sector, investment, international cooperation, the governance of the state administrative apparatus, resources, projects, social welfare and community protection, were taken into consideration while formulating the fiscal balance plan.
The medium-term fiscal balance plan lies on five major themes namely: supporting economic growths, stimulating and diversifying the government’s sources of revenue, rationalising and boosting the efficiency of the government spending, enhancing the social protection system and enhancing the efficiency of the pubic financial management, the minister said, noting that these themes encompass a number of initiatives that would achieve financial sustainability in the medium term.
The implementation of these initiatives began in 2020 and are expected to reduce the budget deficit gradually down to 1.7 per cent of GDP in 2024. The Sultanate is planned to achieve a surplus of RO 65 million in 2025 under the current trend and the fiscal adjustment measures of the state administrative apparatus.
The minister stated that the overall financial effect of the measures taken as part of the fiscal balance plan during 2020 amounted to RO 1.4 billion in terms of both revenues and expenditure, the minister said.
The total financial effect of the measures due to be taken in 2021 are estimated at RO 3.5 billion with an estimated revenues of RO 565 million of which RO 300 million from value added tax (VAT) in addition to an improvement in revenues from government investments, expanding the selective tax and improving tax collection. These measures are expected to reduce the budget spending by RO 2.9 billion through cutting an additional 5 per cent, the minister said.
The minister stated that the state general budget for fiscal year 2021 lies on setting a budget threshold to all entities which should not surpass the budget amended in 2020. He noted that the reduction in real non-hydrocarbon revenues for 2020 by RO 600 million was due to COVID-19, and the financial effect of the government’s measures to mitigate its negative economic impact. These measures included tax and fees exemptions such as tourism tax, municipality tax on restaurants, municipal tax on commercial establishments, among others.
According to the minister, the government revenues in 2021 are expected to reach RO 3 billion whilst revenues from value added tax and selective tax are expected to reach RO 413 million, a fourfold increase compared with 2020 budget estimates. Revenues from corporate taxes are projected to reach RO 400 million, a decrease of 27 per cent compared to 2020 budget estimates due to the economic impact of COVID-19 and the influence of the economic conditions that of the previous year.
The other current revenues are projected at RO 1.4 billion. Responding to a question about the cost of public debt service and its impact on the budget, the minister said that the total expenditure approved for 2021 budget is estimated at RO 1.2 billion due to the increase in public debt and interest cost. He noted that a new item was introduced to the budget under the title (debt repayment allocation) with an amount of RO 150 million as part of the public expenditure items in order to handle future budget deficits. This in addition to setting aside sale revenues of 20,000 barrels of oil and transferring them to the oil reserve fund.
Al Habsi stated that Oman Investment Authority (OIA) continues revising the organisational and operational structures of the holding groups as well as the restructuring, merging and liquidating of affiliate companies.
OIA has taken reform measures by dissolving Oman Aviation Group and Transom and restoring the former status prior to establishing the group with only two companies to continue to exist which are Oman Air and Oman Airports Management Company. Regarding the employees, the minister said efforts will be made to distribute the available human resources and priority will be given to Omanis to be absorbed in Oman Air and Oman Airports Management Company. — ONA