Spend cuts in 2017 budget

By Samuel Kutty — MUSCAT: Jan. 1: Oman’s 2017 budget is prudently adjusted to the challenging oil market, with the government again resorting to expenditure cuts. The budget, announced in the official gazette on Sunday, envisages total revenues of RO 8.7 billion, increasing by 18 per cent compared with the projected actual revenues for 2016. These revenues consist of oil and gas revenues of RO 6.11 billion, representing 70 per cent of the total revenues. Non-oil revenues are estimated around RO 2.59 billion i.e. 30 per cent of the total revenues. The expenditures are estimated around RO 4.4 billion, decreasing 5 per cent compared with the budget estimates for 2016.

The current expenditures include salaries and entitlements of the employees with an amount of RO 3.3 billion, and also contain annual allowance and operating expenses of RO 0.6 billion. According to a statement from the Ministry of Finance, the overall framework of 2017 budget comes in line with the approach adopted in the last two years.
“Such approach aims at rationalising spending and enhancing its efficiency as well as keeping public spending within sustainable levels,” the statement said.
“Despite the sharp drop in oil revenues, the growth of GDP at constant prices came as a result of economic and fiscal policies pursued by the government in the last two years.
With expected improvements in oil prices in 2017, GDP is projected to experience a growth of 2 per cent while non-oil activities are expected to rise by 4.7 per cent,” the statement said.
The current budget is based on an average oil price of $45 per barrel, as in the previous year, while the deficit is projected at RO 3 billion.
Higher deficit at recorded levels over 2015-2016 led to a rapid growth in debt, increasing by 29 per cent of GDP by 2016-end.
Consequently, debt service ratio will increase in the coming years.
While the government expects crude revenue at 51 per cent to RO 4.450 billion, gas is expected to contribute 19 per cent at RO 1.660 billion.
The remaining 30 per cent is to be constituted by other sources.
According to a statement, 70 per cent of the deficit will be financed by external borrowing.
The remaining will be financed through domestic borrowing and withdrawals from other sources.
The 2017 budget focuses on rationalising costs and reducing non-essential expenditure.
Of the total expenditure, RO 8,500 million is for current expenditure and RO 2,665 million for investment spending.
Expenditure for oil and gas production is estimated at RO 1.310 billion, an increase of about RO 10 million from the 2016 budget estimates.
Expenditure on the implementation of development projects is estimated at RO 1 billion and RO 200 million.
Unlike in the previous budget, allocations to civil ministries have been slightly trimmed to RO 4.385 billion, down RO 230 million.
Allocations approved for education, health and social welfare sectors amount to about RO 2.686 billion, which is 23 per cent of overall spending.
Of these, nearly RO 1.586 million will be for education sector, RO 613 million for health sector, and RO 487 million for social welfare.
“These allocations include salaries and entitlements of employees, operating expenses, expenses for health care and education services, and appropriations for social security and welfare,” the statement said.
However, recruitment in public sector during 2017 will be very limited due to the challenges facing the budget resulting from a sharp fall in oil prices, and higher spending on salaries and wages.
Private sector is expected to generate jobs for Omani youth through the establishment of investment projects that have economic returns.