Oman’s budget for fiscal year 2017 differs from that of Saudi Arabia in terms of continuing spending cuts. Saudi Arabia projects expenditures of $238 billion in its latest budget exercise, which is a rise of 6 per cent from 2016.

Oman prepared its budget with slightly lower expenditures and higher revenues versus 2016. The latest one assumes expenditures and revenues of $30.1 billion and $22.4 billion, respectively, for a projected deficit of $7.7 billion.

This is sizeable by virtue of being around 12 per cent of gross domestic product (GDP). The Gulf Monetary Union (GMU) project restricts budgetary deficit to 3 per cent of GDP. (Oman is not a signatory to GMU reflecting its independent ways on its economic choices.) The authorities opt to finance the deficit primarily via borrowing rather drawing on international reserves. The plan calls for securing 84 per cent of financing through local and international borrowing and rest by digging into state reserves.

This suggests that the government would be competing with local investors for raising financing operating in the domestic market. Nevertheless, the projected requirement is not significant in a way to crowd out private sector investors.

By comparison, the authorities prepared the budget for fiscal 2016 with expenditures of $30.6 billion and revenues of $22.1 billion, for an ensuing deficit of $8.5 billion. However, official data point out to a shortage of $12.3 billion in the first 10 months of 2016 alone, and ostensibly higher for the entire year.

This partly explains the determination on the part of the government to limit spending where possible this year through austerity measures. For instance, the government has warned of limited new job opportunities in the public sector.

This is a vital development, as creation of jobs for locals fuelled social discontent in the sultanate in early 2011 against the backdrop of Arab Spring. The government responded by promising creation of thousands of new jobs for locals in the public sector.

The government has earmarked some $8.6 billion for defence and security in fiscal year 2017. Oman has a track record of appropriating a large share of the budget for security reflecting the country’s conservative views.

Going further back to fiscal year 2015, the budget was prepared with expenditures of $30.6 billion and revenues of $30 billion. That marked the first full year since the plunge of oil prices in 2014.

Among other things, statistics for fiscal years 2015 through 2017 reveal the extent of drop of revenues from more than $30 billion to less than $23 billion, and thereby higher budgetary deficits. The petroleum sector contributes about 79 per cent of total treasury income.

Clearly, the well-being of Oman’s economy is dependent on movements of oil prices. Oman is not a member of Opec, reflecting the desire to maintain independent economic choices, much like it not joining the GMU.

Worryingly, public spending is exceptionally influential, as evidenced by making up 46 per cent of the GDP. This means the welfare of the economy depends largely on the government, which in turn relies heavily on the oil market. This equation is a problematic one.

The writer is a Member of Parliament in Bahrain.