Abu Dhabi: Oman's government spending will rise slightly next year, after a sharp increase this year as the country boosted social spending, Finance Minister Darwish Al Balushi said yesterday.

Al Balushi said budget spending this year would total about 9.1 billion Omani riyals (Dh87 billion), up from an original plan of 8.1 billion riyals. The country increased spending after a wave of social unrest prompted by Arab Spring political protests across the region.

Next year's spending will be "a little more" than 9.1 billion riyals, Al Balushi said, speaking on the sidelines of a meeting of Gulf finance ministers and central bankers.

Protests demanding jobs and an end to corruption prompted Sultan Qaboos Bin Saeed to promise a $2.6 billion (Dh9.54 billion) spending package in April. He also announced plans to create 50,000 new jobs.

Development bond

At the same meeting, the head of Oman's central bank said the non-Opec oil producer would issue a bond to fund development projects.

"The government is issuing a government development bond before the end of this year in the range of 150 million riyals," Hamoud Bin Sangour Al Zadjali said. "It is meant for the local market and issued by the government through the central bank."

Oman's commercial banks are set to boost profits by about 10 per cent this year, driven by growth in loans and other core businesses, Al Zadjali said.

"The Oman banking system is resilient, strong and comfortable.

"Looking at the third quarter profits, we will see upward growth in the region of about 10 per cent for 2011," he said.

Al Zadjali added that banks' loan books were growing at an annual rate of about 8 to 10 per cent at the end of the third quarter of this year, with deposits showing similar expansion. He said the country's first two full-fledged Islamic banks would be operational in early 2012.

Public offering

The two banks will raise 40 per cent of their capital through initial public offers of shares, he said.

Bank Nizwa and Al Izz International Bank, sponsored by local investors in Oman, have received licences from the central bank to operate as wholly Islamic financial institutions but have not yet opened their doors.

Al Zadjali said Oman's banking sector had no "direct" exposure to the Eurozone debt crisis.