Seminar discusses Oman budget 2020 and measures to drive growth
Muscat - Continued government spending in specified areas along with the active role of the private sector is expected to help achieve fiscal stability and drive economic growth in the sultanate, KPMG Lower Gulf representatives said at a seminar held in Muscat.
Following publication of Oman’s Budget for 2020, KPMG Lower Gulf provided analysis and discussed its implications for corporates with a number of Oman’s business leaders, a press release said.
Ashok Hariharan, partner and head of tax at KPMG Lower Gulf Oman, presented some of the key highlights of the budget and addressed what it means for businesses. He was joined by panellists and officials from Ministry of Finance (MoF) who provided insights on Oman’s economic performance in 2019, expectations for 2020, as well as the business opportunities available for local and foreign investors.
Oman revealed its 2020 budget on January 1. Total spending is budgeted at RO13.2bn, an increase of 2 per cent against the previous year’s budget. Revenues are estimated to grow by 6 per cent to RO10.7bn, leaving a budget deficit of RO2.5bn. The deficit is 8 per cent of the GDP for 2020, which is targeted to grow by 3 per cent.
This year’s budget is based on an oil price of US$$58/bbl, which is the same as budgeted for 2019. The average realised price of oil for 2019 was US$$64/bbl.
The 2020 budget demonstrates the government’s focus on controlling deficit, which is expected to decline by 11 per cent from RO2.8bn in 2019 to RO2.5bn in 2020. Debt as a proportion of GDP is likely to rise but remain below 60 per cent. Oil and gas revenues constitute a significant portion of government revenues (72 per cent), although the proportion is slowly declining. Expenditure is kept under control with a budgeted increase of only 2 per cent, attributable to an increase in interest cost on borrowings.
Hariharan said, “The importance of achieving a fiscal balance as envisioned by the 2020 budget is underlined by the government’s ‘Tawazun’ initiative, which seeks to enhance revenues, optimise costs and reduce debt. The private sector is expected to play a greater role in development projects, job creation and achieving economic diversification. Investor friendly regulatory changes made in 2019 are expected to assist in achieving targeted rates of foreign and domestic investment. Development spending of RO5.3bn is also expected to generate employment opportunities. We believe the budget steers the economy in the right direction in these challenging global economic situations.”
The government is also focusing on developing a multi-year budget framework (2020-2024) after considering Vision 2040 and the Tenth Five-Year Plan. This is one of the five-point action plans identified to achieve fiscal balance over the medium term. Five strategic sectors (manufacturing, transport and logistics, tourism, fisheries and mining) have been identified as key to diversification, moving the economy away from oil and gas and the contribution of these sectors to the GDP stood at 20.6 per cent in 2019.
The seminar also included a discussion with esteemed panellists H H Dr Adham al Said, assistant professor of economics, Sultan Qaboos University; Sanjay Kawatra, COO, Ominvest and L’oai Bataineh, CEO, U-Capital. MoF officials also provided valuable insights on aspects such as economic benefits reaped from government investments over recent years, efficient debt control policy and potential opportunities for the private sector in upcoming mega projects.
Overall, all speakers at the seminar noted that the 2020 budget provides the right outlook to achieve fiscal balance, continue investment spending and maintain social welfare.