The Oman government has projected a smaller deficit with new austerity measures and tight curbs on spending in its 2017 budget announced on January 1. The budget 2017 aims at tackling falling oil prices with a plan to put the country on the right path, according to Oman newspaper reports.
Government spending this year is projected to total 11.7 billion rials ($30.4 billion) and revenues 8.7 billion rials, which would result in a deficit of 3 billion rials. That compares with the government’s original 2016 budget plan of 11.9 billion rials in spending, 8.6 billion rials in revenues and a 3.3 billion rials deficit.
With more austerity measures, including spending on only essential projects, the government hopes the budget with a OMR3 billion deficit will help improve the country’s economy.
The budget statement stipulates that public sector recruitment will be low, austerity measures will continue, subsidies will be reviewed, government assets will be sold off or privatised and funding will only be channelled into projects essential for Oman’s non-oil future.
Royal Oman Police has been tasked with amending fees for public services, there will be an amendment to income tax laws, and there will be selective taxes on items such as alcohol and tobacco and a limit on tax exemptions for some companies.
The budget statement also reveals that government subsidies will be cut gradually.
In the hope of an improvement in oil prices, Oman’s government hopes the economy to expand by two percent in 2017. Despite the sharp drop in oil revenues, Oman’s GDP growth at constant prices is projected to be positive for 2016 as a result of economic and fiscal policies adopted by the government over past two years, the 2017 budget statement released by the ministry of finance said.
“With expected improvements in oil prices over 2017, GDP is projected to experience a growth of two percent, while non-oil activities are expected to rise by 4.7%,” it said.
Low oil prices have been a drag on the country’s economic performance in the last two years. In 2015, the country’s GDP at current prices dropped 14% to OMR26.8 billion from OMR31 billion in 2014. GDP at current prices dropped by 11% during the first half of 2016.
The budget statement said that inflation in Oman averaged 1.85% in 2016 and it is unlikely to exceed 2.8% in 2017.
“In 2016, the national economy benefited from the decline of non-energy commodity prices. Consumer and producer prices are expected to remain quite low over 2017. Thus, consumers would benefit from lower prices of commodity and producers will also take advantage of lower production cost,” the ministry’s statement added.
Commodity prices continue to remain weak and global inflation is expected to remain low, it said. “All main commodity price indices are expected to decline in 2017, mainly due to abundant supplies and weak demand as for industrial commodities.”
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