Oman’s budget for fiscal year 2016 takes into account unwelcome realities of the oil market. Last week, oil prices dropped to below $35 a barrel, the lowest in 11 years.

With regards to fiscal year 2016, projected statistics call for expenditures of $30.9 billion and revenues of $22.3 billion, and thus a deficit of $8.6 billion.

The figures do not compare positively with original 2015 statistics, which assumed expenditures and revenues of $36.6 billion and $30 billion, respectively, and ensuing deficit of $6.6 billion.

To be sure, the year ended with a shortage of $11.9 billion, undesirably 80 per cent above the budgeted figure. Not surprisingly, this was mainly due to declining revenues on the back of falling oil prices; still, checked spending only limited the deficit’s magnitude.

By one account, treasury income dropped to $23.1 billion in 2015, unpleasantly showing a reduction of 23 per cent. This figure is relatively close to projected revenue for fiscal year 2016.

Still, it is believed that total expenditures in 2015 declined to $34.8 billion or some 5 per cent below thanks to efforts of streamlining spending.

Reverting to 2016 budget, defence and security soaks up the majority or 29 per cent of the total allocated expenditures. Conservative Oman takes security seriously partly reflecting regional geopolitical challenges including developments in neighbouring Yemen. Additionally, other major sources are education and development expenditures at 14 per cent and 11 per cent of the total, respectively.

However, officials seem determined to make good on warnings of reducing offered subsidies. The projected amount for subsidies is put at $1.4 billion in 2016 down from $3.4 billion in 2015, a sizeable drop reflecting new-founded determination to rationalise spending. Put differently, subsidy cost is put at 5 per cent of projected spending in 2016, down from 9 per cent in 2015.

Understandably, authorities intend to place emphasis on rationalising spending in 2016 by eliminating fat where possible. Trouble is officials could not overlook the unemployment challenge, reportedly compromising around 8 per cent of the national work force, according to a study released by the World Economic Forum. Still, joblessness is a more serious problem among the youths, believed to be more than double the national average. The public sector is a primary employer for locals, in turn requiring spending.

Such is the highest jobless rate within the Gulf Cooperation Council (GCC) countries. Likewise, Bahrain and Saudi Arabia suffer from joblessness among locals.

Turning to financing the deficit, it seems that authorities intend to generate funds from diverse sources including drawing on national reserves, which lately stood at $19 billion, commercial loans and grants from fellow GCC countries. In 2011, wealthy GCC states committed themselves into granting each of Bahrain and Oman a grant of $10 billion over a span of 10 years to help addressing outstanding socioeconomic difficulties. Worryingly, Omani economy remains heavily dependent on the petroleum sector for its well-being. For fiscal year 2016, the projections call for oil and gas making up 53 per cent and 19 per cent of total revenues, respectively, or 72 per cent collectively. In 2015, the petroleum sector compromised 78 per cent of the revenues.

Concurrently, officials cannot be blamed for seeking ways to enhance non-oil revenues, which constituted 22 per cent of total revenues in 2015, but hoped to rise to 28 per cent of total revenues in 2016.

Clearly, the budget for fiscal year 2016 rests on success of the formula of rationalising spending and enhancing non-oil sources. It is a challenge worth trying while pressing for a soft landing of the economy.

The writer is a Member of Parliament in Bahrain.