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The Omani government has pledged to build on efforts to rein in the country’s once-ballooning public sector wage bill — part of an array of measures designed to rationalise government expenditure and boost fiscal efficiency.
Public sector salaries and wages account for a staggering 60 per cent of the total operational expenditure of civil service ministries — a trend that is neither sustainable nor fiscally prudent, the government noted in its newly unveiled Medium Term Fiscal Plan (MTFP), a four-year blueprint for dramatically reducing the country’s yawning budget deficit and external debt to manageable levels.
“Currently, salaries and wages are the single most significant cost in the state budget, accounting for more than 60 per cent of total operational expenditures for the government entities. Work is undergoing to introduce individual and entity performance management system and linking this system to the wage bill,” the Ministry of Finance noted.
It recalled in this regard efforts to contain the growth of the public wage bill over the past five years, notably a hiring freeze, save for essential public services such as health and education.
According to the Central Bank of Oman (CBO), staff-related expenditure, encompassing wages, salaries and allowances, remained the “largest contributor to the current civil ministries’ expenditure” with a share of about 73.5 per cent in 2018.
The public wage bill amounted to RO 3.214 billion in 2018, down from RO 3.366 billion a year earlier, entailing a decline of 4.5 per cent on the back of spending rationalisation measures introduced at the time.
Of this total, salaries and wages alone accounted for a 49-per cent share, while the balance was distributed across allowances (38 per cent), contribution to pension fund (8 per cent) and other remunerations (5 per cent).
“Additional areas of focus are underway to help not only contain growth but bend the current expenditures cost-curve downwards in the medium-term,” the Finance Ministry further noted.
Far-reaching measures contemplated by the government as set out in the Medium Term Fiscal Plan (2020–2024) are aimed at gradually pare Oman’s budget deficit to 1.7 per cent of GDP in 2024, down from around 16 per cent presently.
In addition to reducing the operational and development expenditures of government agencies by 10 per cent from the 2020 State General Budget, the roadmap enshrines a goal to achieve further efficiencies in 2021 notably by cutting recurring spending to levels realised in 2020.
But the spending cuts will be nuanced so as not to trigger any unhelpful disruptions, the Ministry stressed. “Cost optimisation and reductions are not across-the-broad cuts, but rather rationalised in order to ensure the least disruption to government operations,” stated the Ministry.
It cited in this regard the landmark restructuring measures announced in August 2020, which are designed to increase operational efficiency, unlock synergies, and realise real savings on a structural basis.
In line with this goal, development expenditures will be primarily targeted towards the maintenance of critical infrastructure and prioritisation of new projects necessary to sustain the country’s economic development. This approach will not only present cost-saving opportunities for the government, but will also enable the private sector to play a bigger role in driving national growth, it added.
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