Blueprint for economic recovery and fiscal sustainability

Affirming an earlier pledge to prudently manage the country’s financial resources and improving fiscal sustainability, His Majesty Sultan Haitham bin Tarik approved the Medium-term Fiscal Balance Plan (2020-2024) on October 22, 2020.

The plan includes a set of programmes whose overall goal is to lay down foundations for financial sustainability in the Sultanate, cut down debt, raise the efficiency of government spending through prioritising of financial action, increase government income from non-oil sectors, bolster the State’s financial reserves and improve revenues from government assets to enhance their capacity to address any financial challenges and to channel these revenues into the right course for economic growth and prosperity.

At the same time, His Majesty the Sultan issued directives to speed up the establishment of a national integrated system for social insurance with a view to protecting low-income segments and Social Security Scheme families against any adverse impacts from the Plan.

He also issued directives for the implementation of a number of developmental projects in various governorates, to the tune of RO 371 million.

Oman’s fiscal sustainability is considered an enabler for Oman Vision 2040, and an immediate priority to allow the Vision’s implementation to begin on a strong standing.

Fiscal sustainability aims to improve the ability to withstand financial circumstances and absorb and economic or social challenges that may arise in the future, as well as ensure financial efficiency for the government and the ability to fund the vision’s development plans.

The Omani government has reiterated the importance of a centralised single window system for registering new businesses and issuing commercial licences – a mandate currently vested with Invest-easy, a portal set up under the auspices of the Ministry of Commerce, Industry and Investment Promotion.

The significance of a one-stop national licensing portal has been highlighted in the newly published Medium Term Fiscal Plan (20202024) formulated by the Ministry of Finance as a strategy for reining in Oman’s ballooning annual fiscal deficit and external debt.

Stressing the importance of electronic transformation initiatives to help strengthen Oman’s business-friendly credentials, the MTFP blueprint noted: “Achieving a comprehensive electronic transformation in the procedures for registering companies and issuing commercial licences through the “Invest Easy” initiative, so that the initiative represents for the business community in the Sultanate a single access point to all electronic government services.”

To this end, much progress has been made in the integration of various government agencies — 26 entities to date — into the Invest Easy system, according to the Ministry of Finance.

They include the municipalities of Muscat, Suhar and Dhofar, which has reduced the time required to start a business from several weeks to only a number of weeks.

Significantly, all of the government ministries and agencies that have are stakeholders in the overall licensing process are now integrated into the InvestEasy port. These include the Ministry of Commerce, Industry and Investment Promotion; Public Authority for Civil Defence and Ambulance (PACDA); Ministry of Labour; Ministry of Heritage and Tourism; Tax Authority; Environment Authority; Ministry of Transport, Communications and Information Technology; Ministry of Agriculture, Fisheries and Water Resources; and Public Authority for Special Economic Zones and Free Zones.

In September, the Central Bank of Oman (CBO) unveiled a slew of policy measures – the second since March this year – designed to strengthen the ability of banks and Finance & Leasing Companies (FLCS) to support the country’s economic revival. The new measures granted a further extension of the timeline for the existing loan deferment scheme, enhance the tenor and limit of the Forex Swap facility provided by the Central Bank, revise the Loan to Value (LTV) ratio for housing loans, and allow consideration of a relaxation of the Liquidity Coverage Ratio (LCR) for banks.

Importantly, as part of the latest measures, the apex bank has extended the validity of its Loan Deferment Scheme, which were unveiled at the onset of the pandemic in March this year, till the end of the first quarter of 2021.

“It has been decided to further extend the availability of the deferment scheme of loans / instalments / interest for affected borrowers particularly SMES, without adversely impacting the risk classification of such loans, till March 31, 2021,” the Central Bank stated.

Seeking to provide relief to housing loan applicants, particularly first-time buyers of housing property, the CBO decided to reduce the Loan to Value (LTV) margin for housing loans to 10 per cent, down from the existing requirement of 20 per cent. This measure, it stressed however, is permitted only in respect of first-time homebuyers of residential properties for own purposes.

Nevertheless, banks are permitted to include the cost of registration and insurance in the value of the housing property while computing the LTV in respect of all housing loans, it said. The latest initiatives come just under six months since the Central Bank announced a raft of policy measures and financial incentives designed to unlock an estimated RO 8 billion in additional liquidity for the benefit of businesses impacted by the economic downturn and the COVID-19 threat.

Around 33 projects and initiatives, involving investments totalling in excess of $2.5 billion, are currently available for local and international investment across the Sultanate.

A list of these ventures, spanning the healthcare, agriculture and fisheries, food security, mining, manufacturing and logistics sectors, was unveiled by the Ministry of Commerce, Industry and Investment Promotion (MOCIIP) recently.

Hospitals and related healthcare ventures account for a third of the projects in the portfolio. Overseeing these projects is the Public-private Partnership (PPP) Unit of the Ministry of Finance. Currently in planning are general hospitals each worth $72.80 million at Bahla and Samayil, as well as a string of similar general hospitals named Al Namaa ($73m), Al Falah ($72.8m), Al Najat ($72.8m) and Rashad ($70.2m). More modestscale hospitals are also planned at Dhalkout ($39m), Al Mazyouna ($33.8m), and Bukha ($18.2m), while a one-of-a-kind National Rehabilitation Centre is also on the cards at a cost of $52 million.

The Public Authority for Special Economic Zones and Free Zones (OPAZ), which regulates all four of the country’s biggest free zone developments, is overseeing a string of miningrelated investments. The largest of these is a soda ash production plant at a cost of $145.64 million.

Also available for investment are smaller-scale ventures, currently in the conceptual stage, that include a clinker manufacturing facility ($20.72m), quick lime production plant ($14.3m), and a ground calcium carbonate factory valued at $7.25m.

Oman Food Investment Holding Company (OFIC), the government’s food investment and development arm, is soliciting investments in four key ventures – part of a large portfolio of projects designed to secure the Sultanate’s access to essential food commodities and related goods. Currently, open for investment are a Food Logistics Company ($19.3m), Food & Vegetables Marketing Platform ($4.43m), Food Techno Park ($10m) and Animal Vaccine Project ($30m).