Continuing a new trend started in 2012, Oman’s budget for fiscal year 2013 is not exceptionally conservative with regards to projected revenues due to assumption of relatively higher oil prices.

The average oil price in the new budget stands at US$85 per barrel versus $75 per barrel in 2012. By comparison, the assumed rates for 2011, 2010 and 2009 were $58, $50 and $45 per barrel, respectively.

Undoubtedly, this is a significant development given the magnitude of the petroleum sector to the treasury. By one account, petroleum revenues are divided into 63 per cent for oil and 13 for cent for gas, or 76 per cent of total budgetary revenues.

On a negative side, heavy reliance on the hydrocarbons sector places the local economy at the mercy of developments in the international oil market. Oman is a price taker partly by not being Opec member by choice, reflecting the desire of maintaining an independent management of its economic strategies.

Still, other notable developments concerning the petroleum sector pertains to expected oil output in 2013 of not being materially different from that of 2012. Crude oil production is projected at 930,000 barrels per day in 2013. In retrospect, the assumed oil output was put at 920,000 bpd in 2012 but 878,000 bpd in 2011.

This may suggest near completion of output hike from the Mukhaiznaoil field. Occidental of the US and its partners won a concession back in 2005 to develop the field, during which they committed themselves to increase its production from a mere 10,000 barrels per day to 150,000 barrels per day. To do this, the developers have committed a sizable amount of $2 billion to develop Mukhaizna, with all the positive spillover effects to the local economy.

Looking at budgetary statistics for, revenues are projected at $29.1 billion, showing an attractive growth when compared to anticipated figure of $22.9 in 2012. The credit chiefly relates to assumption of stronger average oil price.

Also, total expenditures are put at $33.5 billion, up from $26 billion in 2012 but with final figures for last year not being out yet.

This leaves behind deficit of $4.4 billion, a sizable amount by the mere fact of accounting for about 6 per cent of the country’s GDP of $71 billion. However, chances are good that no real deficit would be posted on the back of prevailing prices in the oil market, running above $90 per barrel, comfortably above the assumed rate in preparing the budget.

Like the other five Gulf Cooperation Council (GCC) countries, government spending in Oman is vital by virtue of accounting for more than one third of the country’s GDP. On the one hand, steady public sector spending is uniquely timely if only to encourage private sector investors to follow suit. It is widely believed that some private investors delayed their investment decisions following eruption of unrest in the first quarter of 2011.

Still, the stronger spending should help addressing a disturbing economic challenge of relatively high unemployment rate of 15 per cent. The jobless headache partly reflects population statistics of half of the nationals being 20 years of age.

On the other, strong governmental spending has its drawbacks including threat of causing inflationary pressures. In line with other GCC countries, inflation is not a problem by the mere fact of running around 3 per cent.

Also, strong public spending is not crowding out private sector investors in Oman, as banks compete for securing business thanks to abundant financial resources. In many respects, the Omani economy is heading for soft landing in 2013.

The writer is a Member of Parliament in Bahrain.