Oman recorded a 210 million Omani riyals ($546m) budget surplus at the end of February, compared with 457 million riyals deficit a year earlier, as oil prices nearly doubled, according to the Ministry of Finance.
Net oil revenue in 2022 rose 81 per cent year on year to 1.09 billion riyals during the first two months, as the country sold its crude for an average of $81 per barrel compared with $42 per barrel a year ago, according to the ministry's monthly bulletin on fiscal performance.
Average oil production increased to 1.01 million barrels per day, compared with 953,000 barrels per day during the same period in 2021, it said.
The Ministry of Finance "seeks to utilise the surplus arising from higher oil prices to reducing fiscal deficit and minimising the cost and risks of its debt portfolio", it said.
Last month, Sultan Haitham, Ruler of Oman, said that the country plans to use revenues from soaring oil prices to reduce its public debt and support spending on government projects, while ensuring inflation does not affect basic commodity prices.
Crude prices hit a 14-year high in March, touching nearly $140 a barrel as the Russia-Ukraine conflict led to sanctions on the world's second-largest energy exporter, threatening to widen the gap between stagnating supply and growing demand.
While prices have retreated they remain above $100 a barrel, with Brent, the global benchmark for two thirds of the world's oil, up about 37 per cent since the start of this year.
Oman, a relatively small crude producer compared with its Gulf neighbours, is more sensitive to oil-price swings and was hit hard by the Covid-19 pandemic and the collapse in oil prices in 2014.
However, higher oil prices in 2021, along with fiscal reforms, helped narrow government deficits.
Oman's government revenue rose an annual 75.6 per cent to 1.9bn riyals by the end of February, on higher oil and gas revenue, VAT receipts and higher collection of fees, the finance ministry said.
Public spending rose 10.2 per cent year on year to 1.7bn riyals driven by interest payments, investments for civil ministries and gas purchases and transport, the monthly bulletin showed.
The Ministry of Finance said it will reduce the public debt by more than 2.85bn riyals at the end of April 2022, as part of its debt management strategy.
Oman's 2022 budget allocated 4bn riyals to meet debt obligations, including the repayment of 2.7bn riyal loan principals and payment of 1.3bn riyals in loan interests.
In terms of debt management, Oman repaid 1.49bn riyals in loans at the end of March, including an 850m riyal loan prior to its maturity, the finance ministry said.
Oman is also preparing to pre-pay 1.36bn riyals worth of loans at the end of this month, it said.
The country has also reprioritised its development projects in terms of their urgency, cost, and economic and social return, the ministry said. Total spending on development projects during 2022 rose to 1.1bn riyals after Sultan Haitham issued directives to add 200m riyals to the development budget.
More than half of the government's development budget (53.5 per cent) will be allocated to infrastructure projects including roads, airports, ports, irrigation and water resources, town planning and municipal services, government administration, environment and pollution control.
Another 23.5 per cent of the budget will be allocated to social services such as education, vocational training, health, information, culture and religious affairs, community centres and youth centres.
About 15 per cent is allocated for services such as housing, utilities and tourism. About 7.7 per cent will be spent on production of goods from crude to fish.
Last week, S&P Global Ratings upgraded Oman’s long-term foreign and local currency sovereign credit rating for the first time since 2007 to BB- from B+, citing higher oil prices, rising hydrocarbon production and the government’s fiscal reform programme. The credit rating agency also revised the Gulf country's outlook to stable.
A BB rating is a speculative grading that implies the issuer is less vulnerable in the near term.
“The stable outlook balances the significant improvement in the government’s balance sheet over the next three years against higher medium-term fiscal pressure,” S&P said.
The agency expects Oman's economy to grow in 2022 and 2023 with GDP expanding nearly 4 per cent this year and then moderating to about 2.2 per cent on average over 2023-2025.
“Over the next three years, we expect the non-oil sector to be the leading driver of growth. We forecast non-oil growth averaging 2.2 per cent over 2023-2025, relative to 1.8 per cent in 2022,” the agency said.
It expects Oman to achieve a fiscal surplus of 5.7 per cent of GDP this year, from the budgeted deficit of 4.6 per cent of GDP.