Oman’s budget for 2019 confirms a steady enhancement of its public finances after years of decline brought on lower oil receipts. The new budget shows signs of a return to some stability, with the sultanate retaining its conservative socioeconomic policies. This is demonstrated in the more rangebound rise of expenditure against much higher growth for revenues, in turn allowing for a reduction in the deficit.
Expenditures are projected at $33.5 billion compared with $32.5 billion in 2018, when they grew by 6.8 per cent amid the government’s desires to achieve optimum GDP growth to compensate for earlier contractions.
The projected rise in expenditure for this year should help check inflation. In addition, treasury income is put at $26.3 billion compared to $24.7 billion, or more than double the increase in expenditure. This is undeniably linked to developments in the oil sector as well as ongoing efforts to boost non-oil revenues.
While the petroleum sector is the main source of treasury revenue, the government is pressing for diversification like enhancing the role of tourism sector. This has become possible following the opening of the new Muscat airport last year.
The 2019 budget projects a deficit of $7.2 billion, against $7.8 billion in 2018, and assumes an average price of $58 per barrel compared with $50 and $45 in 2018 and 2017, respectively. While not a member of Opec, the sultanate has a history of coordinating its oil policy with that of the oil cartel.
The 2019 budget deficit represents about 9 per cent of GDP, high by global standards. Still, this is lower than in 2018’s 10 per cent. Public expenditure accounts for about 40 per cent of GDP, again high by international standards.
Clearly, the authorities feel the urge to lead economic activity through public sector expenditures. Various private sector firms rely on government expenditure on projects for their well-being. Addressing persistent growth issues require substantial governmental spending.
The jobless rate is in double-digits among the youth. The authorities are opting to restrict certain professions for locals and the move is not popular with the business community.
New entrants to the job market have their own expectations about the nature of their work and compensation. Credit rating agencies have their own views about the health of the economy. S&P for one continues to hold a stable outlook on the back of government’s ability to deal with fiscal difficulties.
Moody’s opted to reduce the sultanate’s credit level while maintaining a negative outlook, and is concerned about the level of public debt.
Oman does stand a chance of overcoming the serious challenges, but in due course.
Dr Jasim Ali is a Member of Parliament in Bahrain.