Oman, which recorded a budget surplus of 784 million Omani rials ($2 billion) in the first half of the year, is poised to post its first yearly fiscal surplus in a decade in 2022, according to Fitch Solutions.
The sultanate's 12-month fiscal surplus is expected to amount to 6.5 per cent of its total gross domestic product this year, Fitch estimates.
Revenue will rise further in the second half of the year because of high energy prices, it said.
“We expect that expenditure growth will remain moderate due to authorities’ commitment to fiscal consolidation,” Fitch said.
Oman’s January-June period budget surplus was driven by a 54 per cent annual increase in government revenue, supported by a more than 40 per cent jump in oil revenue and a nearly 138 per cent increase in gas revenue.
Oman’s average oil price of $87 a barrel for [the first half of 2022] is below the average Brent oil price [of $105.85 a barrel] as Oman’s budgeted oil price is lagged by approximately three months, Fitch said.
“An increase in Oman’s average oil price in the coming months will lead to more growth in its hydrocarbon revenue [in the second half], supporting overall revenue growth which we forecast at 41.3 per cent in 2022.”
Oil prices, which rose by 67 per cent in 2021, continued to increase this year as the Russia-Ukraine conflict led to supply concerns in the market. While prices have dropped in recent days on demand concerns amid growing fears of a recession, they remain near the $90-to-$100 a barrel mark.
Sultan Haitham, Ruler of Oman, earlier this year said that the country planned to use revenue from rising oil prices to reduce its public debt and support spending on government projects, while ensuring inflation does not affect basic commodity prices.
Oman, a relatively small crude producer compared with its Gulf neighbours, is more sensitive to oil-price swings and was hit hard by the coronavirus pandemic.
However, higher oil prices, along with fiscal reforms, helped to narrow government deficit.
The country's public debt reduced to 18.6bn rials at the end of July, from 20.8bn rials at the end of 2021, in line with government efforts to reduce debt servicing cost, Fitch said.
Debt is further projected to decrease to 17.5bn rials towards the end of the year, the report said. This will bring Oman’s debt to GDP ratio to 47.5 per cent in 2022, down from 67.3 per cent last year.
Oman’s expenditure growth is expected to moderate in the second half, in line with authorities’ fiscal consolidation efforts.
“The data release showed an increase of 8.6 per cent in total expenditure, on the back of additional fuel and food subsidies due to soaring prices,” Fitch said.
“We expect that spending growth will decelerate in the second half as global commodity prices start decreasing, reducing pressure on total expenditures, which we forecast at 5.1 per cent in 2022.”
Besides oil, tourism is another major contributor to the state exchequer.
Oman has attracted more than half of the targeted 3bn rials in tourism investments planned between 2021 and 2023 as part of its development scheme, it said this month.
Last month, Fitch Solutions maintained a positive outlook for tourism recovery in Oman during 2022 and 2023, with stronger growth projected in the medium term between 2024 to 2026.