With emphasis on increasing efficiencies, the year 2021 is set to usher in with rationalised spending in Oman even as priority will be for providing basic services to citizens.
While the government is all set to unveil the general budget 2021 and the 10th Five-Year Plan, the focus will be on rationalised spending, reducing deficits and providing basic services such as health, education and social security services to citizens being among the top priorities.
During 2020, the government adopted a policy to reduce the operational and development expenditures of government agencies by 10 per cent from the 2020 State General Budget.
In a recent circular for budget estimates for 2021, the Ministry of Finance said that budget allocations should be in accordance with the financial framework of the tenth five-year plan (2021-2025).
“Priority will be on implementing projects that serve the economic and social goals, while giving weight to operationalise the completed projects,” the circular stated.
The budget is also expected to seek alternative sources of income to finance some government projects and services.
According to the Medium-Term Fiscal Plan for the years 2020-2024, the government is committed to further recognising efficiencies in 2021 by reducing recurring spending compared to the levels achieved in 2020.
The plan seeks to achieve sustainable levels of fiscal balance and establish suitable conditions to support the Oman Vision 2040.
“Cost optimisation and reductions are not across-the-broad cuts, but rather rationalised in order to ensure the least disruption to government operations”, states the plan.
Speaking to Oman TV, Nasser bin Khamis al Jashmi, Secretary-General of the Ministry of Finance said that Oman’s economy will further improve after the fiscal balance plan is implemented.
“Our financial situation saw more challenges because of the economic conditions of the COVID-19 pandemic,” he said.
He said that some of the areas of spending that occupy key segments of the current budget are salaries, which account for 60 per cent, and development spending – money used to serve the community in general.
Budgets for government agencies have been cut by up to 30 per cent, and next year, they will be reduced by an additional five per cent, he said.
The government restructuring undertaken in August 2020 is just one of the many efforts under way to increase operational efficiency, unlock synergies and realise real savings on a structural basis.
The National Programme for Fiscal Balance is currently overseeing a systematic review of government fees for services. The initiative aims to build an initial database of government services and create a unified regulatory framework for their pricing. Work is currently under way to build a guide for pricing government services.
The government is also actively looking at all sources of revenue, including personal income tax, in order to plug the gap in the deficit. Currently, the government is evaluating the tax and how it can best be implemented.
Oman will introduce a value added tax (VAT) system with effect from April 2021 at a standard rate of 5 per cent, with limited zero-ratings but the highest number of exemptions It is estimated to generate over RO 300 million in its first 12 months of implementation, subject to economic conditions.
Oman has undertaken several reforms over the past five years to contain the growth of the public wage bill — including hiring freeze except for critical pubic services such as health and education.
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