Oman 2017 state budget projects smaller deficit, continued austerity

MUSCAT/ Reuters

Oman’s government released a 2017 budget plan on Sunday that projected a smaller deficit but included fresh austerity steps and tight curbs on spending because of low oil prices, which are hurting state revenues.
Government spending this year is projected to total 11.7 billion rials ($30.4 billion) and revenues 8.7 billion rials, which would result in a deficit of 3 billion rials.
That compares with the government’s original 2016 budget plan of 11.9 billion rials in spending, 8.6 billion rials in revenues and a 3.3 billion rial deficit.
The finance ministry said the government planned a string of steps this year to boost non-oil revenues, including changes to income tax, new taxation of goods such as tobacco and alcohol, and changes to fees charged for hiring foreign workers.
Tax exemptions for companies will be cut, electricity tariffs raised for large corporate and government consumers, and fees amended for some services provided by ministries and government bodies.
Shares in two telecommunications firms, Oman Telecommunications and Ooredoo Oman, fell sharply on Sunday after they said the royalty which they paid to the government had been raised to 12 percent from 7 percent.
“Due to the financial pressure on the state budget caused by public salaries, openings for new jobs in the public sector will be limited. It will be up to the private sector to create jobs and employ job seekers,” the ministry said.
Oman lacks the ample oil and fiscal reserves of its wealthy neighbours and its finances have been hit hard by the plunge of oil prices since 2014. In 2015, its deficit was worth 16.5 percent of gross domestic product, according to the International Monetary Fund.
The 2017 budget assumes an average oil price of $45 a barrel. The ministry said it would cover the deficit this year with 2.1 billion rials of international borrowing, 400 million rials of domestic borrowing and the drawdown of 500 million rials from financial reserves.
Oman has said it plans to sell stakes in a string of state companies over the next several years. Procedures to sell shares in the first of these, Muscat Electricity Distribution Co, will be completed in the first half of 2017, the ministry said.