Oman reveals prudent but healthier 2017 budget

Oman reveals prudent but healthier 2017 budget
Oil-reliant Gulf state Oman has lowered spending for this year's budget which it predicts will run on a deficit but likely buoyed by expected higher oil prices in 2017.
2 min read
01 Jan, 2017
Oman is looking to promote its nature to encourage tourists to visit the sultanate [AFP]

Oman is set to cut spending again in 2017, with a new budget unveiled on Sunday.

It comes despite expected higher oil prices this year with the austerity drive looking to reduce spending in the long term and make the sultanate less susceptable to oil shocks in the future.

Despite the spending cuts, Oman is expected to run a considerable deficit, albeit less than last year's.

Oman - along with other oil-reliant Gulf states - has been hit hard by low oil prices. The effect has been a series of deficits and spending cuts, something unimaginable during the sultanate's boom years.

On Sunday, the government revealed a projected budget for 2017 of 11.7 billion Omani rials ($30.4 billion) with expected revenues of 8.7 billion rials ($22.6 billion).

This leaves the Gulf state with a 3 billion rial deficit ($7.8 billion) which will mostly met by international borrowing and digging into state reserves.

Despite the gloomy outlook, there are some positive signs of the horizon for Muscat.

The expected deficit is slightly lower than the one in 2016 and if oil prices do rise, as they have been projected to, Oman could reduce its deficit further.

With around 85 percent of Oman's revenues coming from oil and gas, the sultanate is looking to use the opportunity of budget responsibility to diversify its economy.

Among the areas Oman is looking to open up is industry and logistics with this year's budget allocating around 2.7 billion rials ($7 billion).

The country is also setting itself up to be a holiday hotspot for well-heeled travellers with new hotels and resorts planned along Oman's coastline.

Oman is also relying on the private sector and promoting small enterprises with loans and training.

However, budget cuts have been felt in the sultanate, and the government is keen to avoid passing on too much of the burden to its citizens.

That means new or increased taxes to make up for the deficit. Spending on health, social security and education should remain steady, according to the Oman Observer, but the country's deficit drive is set to continue for some years to come.