Rising oil prices, diversification bode well for budget 2018

MUSCAT Dec 24 – The current recovery in oil prices coupled with the drive towards economic diversification augurs well for Oman to base its 2018 budget at an assumed price of $50 per barrel. The average price of Oman crude in the first 10 months reached $50.6 per barrel, while the deficit dipped 33.4 per cent to RO 3.199 billion at the end of October. According to data from National Centre for Statistics and Information, total revenue in the first ten months of the current year reached RO 6.575 billion, registering a rise of 19.2 per cent rise against RO 5.514 billion in the corresponding period last year.
Revenue from oil and gas accounted for RO 3.661 billion and RO 1.214 billion respectively although customs duties dipped 23.4 per cent to RO 185.7 million and corporate income tax fell to RO 338.3 million from RO 359.4 million. Similarly, average annual inflation based on consumer price during the period stood at 1.6 per cent. Indicators are that the 2018 budget will be based on an assumed oil price of $50 per barrel against $45 set in the 2017 budget. “Although this price is assumed in line with the uptrend in the international oil market, Oman always adopts a conservative and cautionary approach in setting the budget,” said Lo’ai Bataineh, the chief executive officer of U Capital.
The 2018 general budget will be announced on January 1.
Analysts are optimistic the oil market will further tighten in 2018 and support higher oil prices.
The price of the Oman Crude Oil Future Contract at the Dubai Mercantile Exchange, DME Oman, rose 9.3 per cent in November compared with October.
For January 2018 deliveries, the price of Omani crude was set at $60.79 a barrel, $5.19 more than the December 2017 delivery price.
At the same time, crude oil exports reached 24,430,262 barrels – a daily average of 814,342 barrels.
This constitutes a 0.56 per cent rise over the previous month.
The budget for 2018, as revealed to the Economic and Financial Affairs Committee of Majlis Ash’shura last month by Darwish bin Ismaeel al Balushi, Minister Responsible for Financial Affairs, is projected to have RO 12.5 billion, comprising revenues of RO 9.5 billion and a deficit of RO 3 billion.
The deficit, like in the previous year, is proposed to be covered by RO 500 million withdrawals from state reserves and the remaining RO 2.5 billion through internal and external borrowings.
Revenues are expected to be bolstered this year by the introduction of, among other things, excise tax on tobacco, carbonated beverages and potentially even energy drinks.
“Still, the rise in revenue thanks to the increasing oil prices and revenue from other non-oil tools like corporate taxes, will help the government reduce the deficit,” said Lo’ai Bataineh.
The Central Bank of Oman said in a recent report that partial recovery in crude oil prices together with the drive towards economic diversification led to an upturn in the economy with nominal GDP growing by 12.3 per cent in the first half of the year.
“Oman’s fiscal position also registered signs of improvement with the rise in average crude oil price during the period January-October 2017 in relation to the average price during the corresponding period of the previous year,” it said.