Government spending up 10.8pc in 2018

MUSCAT, AUGUST 21 – After remaining subdued for three years, the government expenditure surged over 10 per cent in 2018. According to the Central Bank of Oman, after witnessing an annual average decline of 6.8 per cent during the period from 2015 to 2017, the expenditure increased by 10.8 per cent in 2018. “The surge in oil revenues reinforced socio-economic priorities, resulting in higher government expenditure”, said the apex bank in its annual report for 2018, released on Wednesday. The social security and welfare received a considerable share of the current civil ministries expenditure as part of the commitment to provide a safety net to all sections of the society.
The contribution for high spending emanated from all three main heads — current, investment, and participation and others. In terms of qualitative composition, points out the report, the capital expenditure outweighs the current expenditure, as the former is more growth-inducing. Accordingly, the increase in capital expenditure would potentially boost economic growth and fiscal returns. “The fiscal reforms, especially with regard to subsidies, supported the consolidation efforts by reducing government participation and other expenditure substantially during 2015 and 2016”, points out the report.
According to the report, spending rationalisation continued under almost all heads, viz. “total wages, salaries, allowances and others”, “expenditure on goods and services”, and “subsidies and other current transfers”, reflecting the government’s consistent approach towards fiscal consolidation.
The employees related expenditure accounted for the largest share with about 73.5 per cent.
In terms of functional composition, about 63 per cent of the current civil ministries expenditure was incurred on education, health and housing, indicating the government’s sustained priority to improve the quality of life and human resources development in the Sultanate.
The current expenditure on goods and services steadily declined over the last few years as the government is increasingly outsourcing certain services to improve efficiency, reduce cost and provide further opportunities to the private sector.
“Furthermore, with the continuation of reform measures and better allocation of resources to reduce distortions, the share of subsidies and other current transfers in the current civil ministries expenditure continued to decline”, reveals the report.
However, with improving fiscal space due to recovery in oil prices, the expenditure under this head again inched up considerably during 2018.
Nonetheless, the government is aiming at sustainable spending in the medium to long-term by rationalizing non-development expenditure.
For example, says the report, the current civil ministries expenditure declined by an annual average of 2.5 per cent during the period from 2016 to 2018.
The current expenditure increased by 9.6 per cent during 2018, after witnessing an annual average decline of 2.4 per cent in the preceding three years, and constituted the largest share of about 72 per cent in total expenditure. The civil ministries share in total current expenditure stood at 44.8 per cent in 2018, down from 51 percent in 2017. The defence and national security coupled with oil & gas production received higher current expenditure, while the current expenditure on civil ministries declined during 2018. The current expenditure on defence and national security constituted about 40 per cent of the total current expenditure in 2018. “This is marginally higher than the previous year”, points out the CBO report.