Oman govt subsidy, funding support surpass RO 1 bn in 2019

ROLLBACKS: After being nearly halved from its 2015 high of RO 1.219 bn, subsidy payouts and other funding assistance by the government have been largely on the downtrend in subsequent years in line with strident efforts to curb public expenditure

Subsidy and other forms of funding support extended by the Omani government towards a number of public services and economic sectors jumped 9.9 per cent to top RO 1.031 billion in 2019 up from RO 937.9 million a year earlier — bucking efforts by authorities to rein in expenditure as part of a concerted bid to reduce the widening annual budget deficit.

After being nearly halved from its 2015 high of RO 1.219 billion, subsidy payouts and other funding assistance by the government have been largely on the downtrend in subsequent years in line with strident efforts to curb public expenditure.

But a significant uptick in funding assistance to the power and water sector, among other economic activities, contributed to this latest spike, the Central Bank of Oman (CBO) noted in its 2019 Annual Report.
“The increase in spending under this head was mainly attributed to considerable enhancement in government support to the electricity sector, operational support to government organisations, support on hydrocarbon products to the targeted segment, and subsidies on soft loans to the private sector and housing,” the apex bank stated.

Subsidies and other government funding assistance are broadly grouped under the head, ‘Government Participation and Other Expenses’. Citing provisional figures from the Ministry of Finance, the CBO report noted that subsidy earmarked for the electricity sector accounted for a hefty 58 per cent of the total expenditure under this head.

It surged to RO 600 million in 2019, up from RO 476.6 million a year earlier, entailing a jump of 25.9 per cent.

Additionally, government support to Omani individuals and fishermen benefiting from subsidised petrol and diesel almost doubled to RO 39.9 million last year, up from RO 20 million in 2018.
Subsidised loans for housing, as well as the private sector, surged 42.5 per cent to RO 36.9 million last year, up from RO 25.9 million in 2018.

Also bracketed in the ‘Government Participation and Other Expenses’ category were funding support to government organisations (RO 190.1 million), investment expenditure support to public sector entities (RO 83.1 million), and government assistance in support of a number of domestic, regional and international causes (RO 78.1 million).

“Notwithstanding the pursuit of fiscal consolidation, the increase in expenditure under this head was necessitated by socioeconomic requirements and to support growth through support to government companies and organisations,” the Central Bank remarked.

Significantly, a landmark Medium Term Fiscal Plan unveiled by the government last month enshrines a commitment to gradually phase out subsidy on a number of public services, notably power and water, while channelling savings captured as a result to economically weaker sections of the Omani populace.

The blueprint for fiscal consolidation, spanning the 2020 – 2024 timeframe, noted thus: “The government is pursuing a range of cost containment and expenditure optimisation initiatives. Redesigning subsidies and the social safety net are critical components to helping contain future expenditure growth and capture savings opportunities.

“This initiative intends to reallocate the subsidy to the vulnerable and people who deserve it by gradually increasing the electricity and water tariffs and ensuring that support is provided for vulnerable populations.”

CONRAD PRABHU
@conradprabhu