Oman signals budget spending restraint
Dubai, April 2, 2013
Oman's finance minister signalled on Tuesday that budget policy would become more conservative, after several years in which the global financial crisis and political pressures prompted the government to boost spending sharply.
Since 2011, the government has hiked spending on welfare and job creation schemes to head off social unrest in the wake of the Arab Spring uprisings in the region.
It has also spent heavily on infrastructure such as airports and ports, to diversify the economy before oil revenues fall. Oman's oil reserves are not as big as its wealthy neighbours'; oil firm BP has estimated they could run out in 17 years.
Oman's budget envisages state spending of 12.9 billion rials ($33.5 billion) in 2013, up nearly 30 percent from the 2012 plan. If they continue, such increases will push Oman into deficit; finance minister Darwish Al-Balushi estimated in January that the government would need an oil price averaging $104 per barrel this year to balance the budget, not far from the current Brent crude price of about $110.
But Balushi indicated on Tuesday that spending growth would slow in coming years. He said that in contrast to last year, Oman did not expect this year to spend more than it had originally budgeted.
"As far as the budget is concerned, we have in this year's budget taken all the anticipated expenditure to sustain the expected growth. We do see any unexpected expenditure to occur during the year," he told reporters at a meeting of Arab finance ministers and central bank governors in Dubai.
Asked whether it was sustainable for Oman to continue raising its spending over the medium term, he replied: "Not necessarily. It depends how oil prices will behave and also our level of production.
"However, we think that most of our infrastructure has been completed, therefore we do not have pressure on increasing expenditure."
Oman is currently operating under a five-year plan that runs until 2015, but next year the government will start working on a new plan for 2016-2020, Balushi noted.
He also said his government did not now plan to issue conventional bonds or sukuk (Islamic bonds) this year.
Oman's central bank chief Hamood Sangour al-Zadjali had said last month that the government was likely to issue its first sukuk, denominated in rials, towards the end of 2013 or at the start of next year.
"However, the corporates require some financing to cater for their expansion plans," Balushi said on Tuesday.
"So while the government is not planning this year to tap the borrowing market, whether it is sukuk or conventional bonds, the corporate sector will see, I think before the end of the year, some activity."
Balushi predicted Oman's economy would grow about 6 percent this year, after an official estimate of 8.3 percent last year. Inflation will be under 3 percent, he said. - Reuters