Proof that Omani economy is doing well nowadays entails registering budgetary surplus, sizable economic growth rate and solid credit rating.
In details, officials prepared the budget for fiscal year 2012 with a shortage of $3.1 billion (Dh11.4 billion) on the back of expenditures and revenues of $26 billion and $22.9 billion, respectively. However, judged by performance of the first half, most likely the fiscal year would end with a resounding surplus.
Official data put revenues for the half of 2012 at $19.1 billion up from $14.1 billion for the corresponding period in 2011. Concurrently, total expenditures stood at nearly $20 billion almost double the amount for the first six months of 2011.
A key reason behind the sharp rise in income relates to oil income, as authorities used an average rate of $75 per barrel in preparing the budget, considerably below prevailing market prices. Conservative Oman is noted for assuming relatively low oil prices as a conscious policy choice. It is believed that actual petroleum income grew by nearly a quarter versus the projected figure during the period.
Happily, the strategy of strengthening oil production is taking place against the backdrop of steady oil prices the international market. According to the June 2012 issue of BP Statistical Review of World Energy, the sultanate’s oil production amounted to 715,000 barrels per day (bpd) in 2007 only to increase to 891,000 bpd in 2011.
The performance partly reflects progress of output at Mukhaizna oil field. Looking back, Occidental of the US and its partners won a concession back in 2005 to develop the field after committing themselves to invest some $2 billion, as part of efforts to increase Mukhaizna’s production to 150,000 bpd.
Oil income is significant by virtue of contributing around two thirds of treasury revenues. Wrongly, well-being of the sultanate’s economy partly depends on developments within the oil market. Oman is not a member of the Organisation of Petroleum Exporting Countries (Opec), reflecting an-age old desire of maintaining independent economic choices.
Not surprisingly, credit rating agencies seem pleased with improved economic conditions in Oman. In July, Standard & Poor’s Investment Services reversed its outlook for the sultanate from negative to positive on the back of political reforms and economic measures designed to meet popular demands. Earlier, another credit rating agency, Moody’s, reaffirmed A1 or an investment grade to Oman, for both foreign and local government bonds, with a stable outlook.
In response to recent socio-economic events, authorities decided to spend a notable $2.6 billion on numerous projects and initiatives. Adopted measures included creating some 40,000 jobs in governmental establishments, which are popular with locals, allocating financial support for job seekers and increasing pension amounts.
Not surprisingly, recently released statistics suggest nominal gross domestic product (GDP) growing by nearly 19 per cent in the first quarter of 2012, certainly an extraordinary performance, thanks chiefly to rising value of the petroleum sector. By one account, Oman stands the chance for winning the title of the fastest growing GDP in the region by 2013 on the back of steady spending and serious efforts to address outstanding socio-economic challenges.
Clearly, the country’s leadership has shown appreciation for popular demands and made some right choices, in turn supported by steady oil income, and now reaping the fruits.
