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Largest budget in history - Oman keeping economic growth up

Global Arab Network - - George Haddad

Saturday, 23 January 2010 14:46

As global market fundamentals return to a more favourable outlook for 2010, Oman can be reassured that it has weathered the storm of 2009 without too much discomfort, and remains in good shape to take advantage of renewed trade and investment opportunities. The IMF anticipates 3.8% real GDP growth for the Sultanate in 2010 - down slightly on the predicted figure of 4.1% for 2009, yet with a more stable consumer price outlook of only 3%, down from 3.3%.

Oman to keep its economic growth moving up by adopting the largest budget in its history for 2010 as it appears buoyed by higher oil prices and a sharp decline in its fiscal deficit through 2009, Oman's newspapers reported.

The 2010 budget based on a more optimistic oil price of $50 a barrel compared with $45 in 2009, the local omani newspapers quoted Minister of National Economy, Ahmed Mecki, as saying.

Budgetary expenditure for 2010 is estimated at RO7.18 billion, nearly nine per cent above the 2009 budget, said Mecki.

Revenues are assumed at RO6,380 million, leaving a deficit of RO800m, slightly lower than the RO810m shortfall forecast in the 2009 budget, the Minister said.

He said the revenues include around RO4,050m in oil exports, accounting for around 63 per cent. Gas revenues are estimated at nearly RO800m (Dh7.68bn).

"The 2010 budget is around nine per cent higher than the 2009 budget while revenues are expected to rise by 14 per cent because the 2010 budget is based on an oil price of $50 a barrel compared with $45 for the 2009 budget."

The new projects to be implemented during 2010:

The total approbations for the new projects to be implemented during 2010 amounted to about R.O (937) million so as to implement a number of development projects which include:
-    Construction of a number of new schools at various Regions
-    Operation and maintenance of Al Ghoubra portable desalination plant.
-    Construction of a number of new health centers at various Regions

This is in addition to the implementation of a large number of service projects along with completion of the ongoing projects.

According to Mr Ahmed bin Abdul Nabi Macki, Oman Minister of National Economy, the Budget for the year 2010 was approved as follows:

1- The revenues:
The State’s general revenues for the year 2010 were estimated by about O.R (6380) million against O.R (5614) million in the budget of the financial year 2009 i.e. an increase by O.R (766) million or (14%). Oil and gas revenues constitute (76%) of the total revenues, whereas the current and capital revenues constitute (24%) thereof.

The oil revenues were estimated on the assumption of an average oil price of US$ (50) per barrel. According to these assumptions, the oil revenues are estimated to amount to about O.R (4050) million i.e. its contribution shall be at about (63%) of the total revenues, whereas the contribution of the gas revenues in the amount of O.R (800) million shall constitute (13%) thereof. The current and capital revenues were estimated to about O.R (1530) million i.e. an increase by (8%) over 2009 budget or (24%) of the total revenues.

It is noteworthy that oil and gas revenues finance about (68%) of the public expenditure, whereas the non-oil revenues finance about (21%) thereof. Therefore there is a considerable improvement in these rates compared with the last year of the Seventh Five-Year Plan (2006 – 2010), as the finance rate of the oil and gas revenues decreased (from 83% to 68%) against an increase in the finance rate of the non-oil revenues (from 17% to 21%).

2- The expenditure
The total expenditure for the financial year 2010 was estimated at about O.R (7180) million against O.R (6424) million in the financial year 2009 i.e. with an increase by O.R (756) million or by (12%). This total expenditure shall cover the following elements and constituents of expenditure:

1.    The current expenditures of the government civil ministries and units were estimated at about O.R (2500) million i.e. with an increase by O.R (330) million, or by (15%) over the estimates of the previous year 2009. The current expenditures represent (35%) of the total general expenditures. These approbations include coverage of the basic government services, the operational expenses of the government ministries and units, expansion of the educational and health services and the expenses of operating the new projects.

These approbations include the amount of the periodic allowances for the employees in January 2010 and the amount of covering the financial differences of the promotion of the employees entitled to such promotion since the year 2005 with a total amount of O.R (43) million. Considering the social factor, an amount of O.R (36) million has been allocated for paying up the approbations of the social security for a number of (50250) case.

It is worth mentioning that about O.R (30) million have been allocated to cover the operational expenses of the new projects intended to be operated for some Ministries during the year 2010 which will result in creating new job opportunities reaching to about (4000) opportunity in the labor market, in addition to the economic growth resulting from operating such projects, in terms of increasing the private investment and the social development in the regions that host those projects.

It is worth mentioning that the approbations allocated for the health and the educational sectors amount to about O.R (1168) million, i.e. an increase by O.R (106) million over the approbations approved in the budget for the year 2009, which represents (47%) of the total current expenditures as follows:-

(A).    The current appropriations for the educational sector amount to O.R (874) million representing (35%) of the total current expenditures of the civil ministries, i.e. an increase by O.R (83) million or (10%) over the approved budget for the year 2009. These appropriations are apart from the approbations allocated for this sector in the development budget estimated by about O.R (62) million in the year 2010.

(B).    The share of the health sector amounts to O.R (294) million, which represents (12%) of the total current expenditures of the civil ministries, i.e. an increase by O.R (23) million or by (8%) over the approved budget for the year 2009.
Note that the number of the jobs available for the educational and the health sectors amounts to about (96) thousand jobs, which represents (72%) of the total government jobs.

2.    Estimates for the expenses of the production of oil and gas amount to O.R (1450) million, which represent (20%) of the total general expenditures, i.e. an increase by (6%) over the approved budget for the year 2009.

3.    Allocations estimated under the development budget amount to O.R (950) million, with an increase by (16%) over the approved budget for the year 2009. These allocations are set to cover spending on the continuing as well as the new development projects listed in the Seventh Five-Year Plan (2006-2010) in the various sectors.

4.    Estimates of the budget allocated for the contributions in the capitals of the companies, the subsidy for the interests of the development and housing loans and the subsidy for the electricity sector amount to about O.R (620) million, with an increase by O.R (135) million, i.e. by (28%) over the approved estimates for the year 2009. These allocations can be detailed as follows:

(A)    Allocations estimated for the contributions in the capitals of the companies owned by the government or the government has shareholding therein amount to about O.R (460) million to finance the projects executed by such companies.

(B)    An amount of O.R (140) million has been allocated to pay up the subsidy given to the electricity sector against the purchase of the power from the companies producing electricity to cover the difference between the amount of purchasing, transporting and distributing power and the anticipated returns from the electricity sales. This in addition to the capital expenses necessary for covering the expansion in the electricity services, apart from the subsidy given to the water sector in the amount of O.R (39) million (which represents the difference between the estimated revenues of the water sector amounting to O.R 51 million and the amount of purchasing the water by about O.R 90 million) to cover the value of the water purchase from Al Ghobra, Barka, Sohar, Sur plants and others.

(C)    An amount of O.R (20) million to subsidize the interests of the development and housing loans provided by the Development Bank, the commercial banks and Oman Housing Bank to the beneficiaries.

3- The Deficit:
In the light of the revenues and expenditures estimates approved in the general budget, the estimated deficit for the year 2010, based on the oil price of US$ (50), will amount to about O.R (800) million, i.e. (13%) of the revenues and (3%) of the Gross Domestic Product (GDP) and it is within the limits of the estimated deficit in the budget of the previous year 2009. Despite the general deficit is considered relatively high, in its absolute value, its percentage from the Gross Domestic Product (GDP) is considered among the economically safe and acceptable rates.

However, the deficit may be covered through resorting to the withdrawal from the state general reserves, in case no excess over the budget estimated revenues is realized.

Global Arab Network

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Last Updated on Saturday, 23 January 2010 14:54

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