The recently released 2024 Oman Budget sets out the objectives, priorities and strategies for achieving an all-round improvement in the socio-economic structure of the Sultanate of Oman for the year 2024.
The budget has been crafted against the backdrop of numerous global challenges, as indicated by the International Monetary Fund, such as geo-political tensions, weakening economic growth, oil price volatility, increasing interest rates, climate change and natural disasters, which have all had a role in undermining global financial stability with consequences for individual countries as well.
The 2024 Budget lays down the guide-posts for accelerating economic growth and creating a conducive business environment.
Priority areas identified by the Ministry of Finance are as follows: achieving fiscal sustainability, stimulating national economy, accelerating non-oil revenue, improving spending efficiency, attracting foreign investments, controlling deficit, lowering public debt, stabilizing inflation, sustaining employment creation, implementing high-priority projects, fulfilling basic needs, continuing welfare subsidies and harnessing human resources.
It is heartening to note that the proactive steps taken in the earlier years towards the management of the economy under the broad framework of the Tenth Five Year Plan (2021 – 2025) have yielded positive results during 2021 to 2023.
The fiscal deficit declined by RO 1,233 million in 2021, with a fiscal surplus of RO 1,146 million achieved in 2022, and a further surplus of RO 931 million anticipated in 2023.
Going by the Ministry’s track record in improving the country’s fiscal performance, it is likely that Fiscal 2024 will yield a reasonable surplus as well, although the 2024 Budget projects a fiscal deficit of RO 640 million.
Any upward swing in average oil prices above $60 per barrel – the assumed price for the 2024 Budget - against the global average of USD 80 projected by IMF for 2024, will augur well for this optimism and favourable shift in the fiscal position.
In terms of real GDP growth, the main indicator for assessing the efficiency of the economy, Oman will achieve 2.3% in 2023 and 2.4% in 2024.
However, the biggest impetus being given towards acceleration of investments in projects in the country will pave the way for enhancing the income stream and contributing to the growth of the economy in the future.
A notable achievement is the reduction in the public debt by RO 2.4 billion in 2023 to RO 15.2 billion in 2023, down from RO 17.6 billion in 2022.
The surplus generated from oil revenue has been substantially deployed to reduce the borrowings and consequently the debt service costs. Debt as a percentage of GDP works out to 35% now and is aligned with well managed economies.
The expected fiscal deficit of RO 640 million is proposed to be funded by external borrowings of around RO 240 million (as opposed to RO 2 billion in 2020) and RO 400 million from sovereign reserves.
Despite the heightened financial shocks faced globally in 2023, domestic inflation was minimal at 1.03% in 2023, thanks to the measures taken towards curbing inflation in the area of subsidies on food and fuel.
These salient measures, notably the strengthening of public finance and reduction in public debt, coupled with the rebound in oil prices, have resulted in enhancing the Credit Rating from the various agencies such as Moody’s, S&P and Fitch and the outlook for Oman.
This will set the trend for generating higher investment inflows into the country.
While analysing the income stream, the ratio between hydrocarbons (Oil & Gas) and non-hydrocarbons was 72:28 in 2023, and is projected to become 68:32 in 2024, which is indeed a good development.
The 5.7% increase in non-oil revenue by RO 190 million has made this shift a welcome feature.
Gross revenue is estimated to grow by 9.5% in 2024 to touch RO 11,010 million (comprising hydrocarbon revenue RO 7,490 million and non-hydrocarbon revenue along with taxes aggregating to RO 3,520 million). Gross spending is likely to go up by 2.6% to RO 11,650 million.
As expenditure is more than revenue, the 20424 Budget comes a fiscal deficit of RO 640 million, representing 6% of the total revenue and 1.5% of the GDP.
Overall, the 2024 Budget a well-crafted blueprint for action, comprehensively covering different facets of the economy and balancing between the challenges on hand and the objectives set for achievement in the future.
[The author is CEO of Wisdom Business and Training Services LLC; email: avm@wisdomoman.com)
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