Sultanate of Oman on track for sound economic recovery
The Sultanate of Oman’s financial performance during the first quarter of this year, as characterised by a budget surplus of over RO 300 million for the quarter, affirms that a national economic recovery is well under way, according to a number of experts contacted by Oman News Agency (ONA).
Dr Nasser bin Rashid al Maawali, Under-secretary of the Ministry of Economy, credited the brightening outlook to concerted government efforts, supported by buoyant international oil prices. The government actions, in particular, helped ensure that economic and financial conditions were conducive to sustained growth.
These efforts were complemented by earnings from high oil prices, which helped deliver a budgetary surplus that will be channelled towards sustained economic growth, notably by enhancing spending on priority development projects to achieve economic and social objectives, while easing public debt.
Describing the Q1 budgetary performance as reassuring, Dr Al Maawali said the improving fiscals will contribute to accelerating the pace of economic growth. They also underscore the positive fundamentals of the Omani economy notwithstanding ongoing global challenges, volatility in international energy margins, and disruptions in global supply chains.
The overall positive outlook also bodes well for the achievement of the medium-term fiscal balance plan for 2020-2024, especially in directing those surpluses achieved in the reduction of public debt, stimulating economic recovery and increase spending on priority development projects.
At the same time, prospects for a comprehensive economic recovery have become better, especially for the sectors most affected by the pandemic, the official said. The State Budget recorded a surplus of about RO 357 million in Q1 2022, compared to a fiscal deficit of RO 751 million for the corresponding period of 2021.
Investment expenditure climbed 131 per cent in Q1 2022 to about RO 150 million compared to the same period of last year. This uptick in expenditure facilitated the spending of ministries and civil units.
The cost of debt servicing also amounted to RO 291.500 million for the quarter.
Also auguring well for improved economic growth is the combination of high oil prices and the increase in the Sultanate of Oman’s crude oil production, which averaged 1,025K barrels per day in the first quarter.
As a result of these contributory factors, the International Monetary Fund and the World Bank have projected GDP growth of about 5.6 per cent this year, buoyed by oil sector growth of 8 per cent and nonoil sector growth of 2 per cent — the highest projections among the GCC countries.
According to Dr Khalid bin Said al Amri, Chairman of the board of directors of the Omani Economic Association, the positive performance of the state budget in the first quarter was also the result of a 70.2 per cent jump in net oil revenues which surged to RO 1.56 billion.
He noted in particular the importance of the improved fiscals to the government’s goal of reducing its public debt, which would have a positive impact on the country’s credit ratings by international agencies including Fitch, Moody’s and Standard & Poor’s.
The improved ratings outlooks have contributed to reducing the cost of public debt, by renegotiating with lenders to take loans at lower interest rates and using them to pay the public debt.
Mustafa Ahmed Salman, CEO of United Securities, said the improved fiscal situation in the first quarter would help boost sentiment in local markets and the Muscat Stock Exchange. It would also have a beneficial knock-on effect on the general economy, by improving the living conditions of citizens, he added.