Improving fiscal resilience to underpin Oman's sustainable economic development
Published: 04:03 PM,Mar 31,2024 | EDITED : 08:03 PM,Mar 31,2024
Oman's economic trajectory is defined by resilience, reform, and a forward-looking vision for sustainable growth.
MUSCAT, MARCH 31
In recent years, Oman has been making significant strides towards economic stability and diversification, as highlighted in a detailed presentation by Hamid Hamirani, Co-Founder - EHA Advisory and former advisor at Oman’s Ministry of Finance during last week’s event of The British Omani Society titles ‘Navigating Oman’s Fiscal and Diversification Reforms. Hamirami’s presentation outlines various key aspects of Oman's economic landscape, shedding light on its fiscal reforms, infrastructure quality, debt resilience, social protection measures, tax revenue challenges, and labour market reforms.
One of the standout achievements for Oman is its positive fiscal balance, shifting to a surplus of 10.1% of GDP in 2022. This transformation was fueled by favourable oil prices, increased tax revenues, and prudent expenditure management, leading to a substantial improvement in the country's fiscal position. Additionally, efforts to reduce fuel subsidies and enhance non-hydrocarbon revenue streams have played a significant role in strengthening Oman's fiscal resilience, he said.
Oman has seen a remarkable decline in its government debt, from 67.9% of GDP in 2020 to 36.7% in 2023, with projections indicating a further decrease to less than 30% by 2031. This reduction in debt levels, coupled with the presence of sizable financial buffers, has helped mitigate sovereign debt stress risks. However, the trajectory of government debt remains subject to external factors such as oil market developments, highlighting the importance of continued vigilance and prudent financial management, Hamirami noted.
Oman's infrastructure quality stands out compared to other emerging markets and even surpasses the averages of Gulf Cooperation Council (GCC) and advanced economies. With a public capital stock-to-GDP ratio of 150%, Oman has made significant investments in infrastructure development, driving economic growth and attracting domestic and foreign investments. Moreover, the optimisation of fiscal flexibility, especially in leveraging declining interest costs, is poised to propel long-term sustainable growth in the country.
Oman's commitment to social protection is evident through its comprehensive support systems for vulnerable groups, including universal benefits for children, disability, and senior citizens. The country has also taken steps to enhance labour market dynamics through reforms aimed at increasing productivity, reducing public-private sector wage differentials, and fostering a more competitive and inclusive employment environment. These initiatives are designed to promote sustainable economic development and ensure social welfare for all citizens, he said.
Despite incremental progress in tax revenue growth, Oman still faces challenges in optimising its tax collection efficiency, particularly in comparison to its GCC counterparts. Addressing the tax gap and enhancing tax administration capabilities are crucial for bolstering government revenues and sustaining fiscal stability. The implementation of targeted tax reforms, including the introduction of a Personal Income Tax law and modernised IT systems, is expected to enhance revenue generation and improve overall tax compliance, the financial analyst pointed out.
Oman's vision for logistics excellence, coupled with emphasis on technological innovation and research collaboration, underscores the country's commitment to driving economic growth and enhancing competitiveness. By leveraging digital technologies and fostering R&D initiatives, Oman aims to unlock new avenues for productivity growth and diversification.
Additionally, the tourism sector holds potential for expansion, with the newly issued tourism law set to attract investments and promote regional development in the country, Hamirami said.
Efforts to optimise health expenditure efficiency and prioritise critical spending in the healthcare sector are essential for improving health outcomes and managing long-term fiscal costs. Similarly, investments in education, including measures to tackle skill mismatches and promote vocational training, are crucial for equipping Oman's workforce with the necessary skills to support economic diversification and competitiveness. Embracing public-private partnerships and enhancing educational quality can further enhance Oman's human capital development.
Oman's new labour law, aimed at advancing gender equity through inclusive work arrangements and increased representation of women in senior positions, reflects the country's commitment to promoting diversity and inclusivity in the workforce, said the expert. Moreover, Oman's net-zero strategy, focusing on green hydrogen production and sustainable investments, underscores its dedication to environmental stewardship and long-term sustainability. These initiatives align with global trends towards green energy transition and sustainable development goals.
Oman's economic trajectory is defined by resilience, reform, and a forward-looking vision for sustainable growth. By prioritising fiscal discipline, infrastructure development, social welfare, and innovation, Oman is positioning itself as a dynamic hub for economic opportunity and inclusive development. As the country continues its journey towards economic diversification and sustainability, collaboration among stakeholders, robust governance frameworks, and proactive policy interventions will be key to unlocking Oman's full economic potential and fostering lasting prosperity for its citizens, he added in conclusion.
In recent years, Oman has been making significant strides towards economic stability and diversification, as highlighted in a detailed presentation by Hamid Hamirani, Co-Founder - EHA Advisory and former advisor at Oman’s Ministry of Finance during last week’s event of The British Omani Society titles ‘Navigating Oman’s Fiscal and Diversification Reforms. Hamirami’s presentation outlines various key aspects of Oman's economic landscape, shedding light on its fiscal reforms, infrastructure quality, debt resilience, social protection measures, tax revenue challenges, and labour market reforms.
One of the standout achievements for Oman is its positive fiscal balance, shifting to a surplus of 10.1% of GDP in 2022. This transformation was fueled by favourable oil prices, increased tax revenues, and prudent expenditure management, leading to a substantial improvement in the country's fiscal position. Additionally, efforts to reduce fuel subsidies and enhance non-hydrocarbon revenue streams have played a significant role in strengthening Oman's fiscal resilience, he said.
Oman has seen a remarkable decline in its government debt, from 67.9% of GDP in 2020 to 36.7% in 2023, with projections indicating a further decrease to less than 30% by 2031. This reduction in debt levels, coupled with the presence of sizable financial buffers, has helped mitigate sovereign debt stress risks. However, the trajectory of government debt remains subject to external factors such as oil market developments, highlighting the importance of continued vigilance and prudent financial management, Hamirami noted.
Oman's infrastructure quality stands out compared to other emerging markets and even surpasses the averages of Gulf Cooperation Council (GCC) and advanced economies. With a public capital stock-to-GDP ratio of 150%, Oman has made significant investments in infrastructure development, driving economic growth and attracting domestic and foreign investments. Moreover, the optimisation of fiscal flexibility, especially in leveraging declining interest costs, is poised to propel long-term sustainable growth in the country.
Oman's commitment to social protection is evident through its comprehensive support systems for vulnerable groups, including universal benefits for children, disability, and senior citizens. The country has also taken steps to enhance labour market dynamics through reforms aimed at increasing productivity, reducing public-private sector wage differentials, and fostering a more competitive and inclusive employment environment. These initiatives are designed to promote sustainable economic development and ensure social welfare for all citizens, he said.
Despite incremental progress in tax revenue growth, Oman still faces challenges in optimising its tax collection efficiency, particularly in comparison to its GCC counterparts. Addressing the tax gap and enhancing tax administration capabilities are crucial for bolstering government revenues and sustaining fiscal stability. The implementation of targeted tax reforms, including the introduction of a Personal Income Tax law and modernised IT systems, is expected to enhance revenue generation and improve overall tax compliance, the financial analyst pointed out.
Oman's vision for logistics excellence, coupled with emphasis on technological innovation and research collaboration, underscores the country's commitment to driving economic growth and enhancing competitiveness. By leveraging digital technologies and fostering R&D initiatives, Oman aims to unlock new avenues for productivity growth and diversification.
Additionally, the tourism sector holds potential for expansion, with the newly issued tourism law set to attract investments and promote regional development in the country, Hamirami said.
Efforts to optimise health expenditure efficiency and prioritise critical spending in the healthcare sector are essential for improving health outcomes and managing long-term fiscal costs. Similarly, investments in education, including measures to tackle skill mismatches and promote vocational training, are crucial for equipping Oman's workforce with the necessary skills to support economic diversification and competitiveness. Embracing public-private partnerships and enhancing educational quality can further enhance Oman's human capital development.
Oman's new labour law, aimed at advancing gender equity through inclusive work arrangements and increased representation of women in senior positions, reflects the country's commitment to promoting diversity and inclusivity in the workforce, said the expert. Moreover, Oman's net-zero strategy, focusing on green hydrogen production and sustainable investments, underscores its dedication to environmental stewardship and long-term sustainability. These initiatives align with global trends towards green energy transition and sustainable development goals.
Oman's economic trajectory is defined by resilience, reform, and a forward-looking vision for sustainable growth. By prioritising fiscal discipline, infrastructure development, social welfare, and innovation, Oman is positioning itself as a dynamic hub for economic opportunity and inclusive development. As the country continues its journey towards economic diversification and sustainability, collaboration among stakeholders, robust governance frameworks, and proactive policy interventions will be key to unlocking Oman's full economic potential and fostering lasting prosperity for its citizens, he added in conclusion.