Oman's second-quarter budget deficit hit $673 million on lower oil prices

Revenue fell 6 per cent while quarterly spending rose 5 per cent, on annual basis

Two lanes of Al Bahri road passing below the Muscat Gate in old Muscat. The International Monetary Fund projects Oman’s economy to expand by 2.4 per cent in 2025. Getty images

Oman recorded a budget deficit of 259 million Omani rials ($673 million) in the second quarter, swinging from a surplus of 391 million rials a year earlier, as revenue slumped on the back of lower oil and gas prices.

Revenue in three months to the end of June fell 6 per cent on an annual basis to 5.8 billion rials as oil prices traded $75 per barrel on an average compared to $82 per barrel in the same quarter of 2024, according to preliminary data from Oman’s Ministry of Finance.

Oman's average oil production during the April to June period also fell to 988,000 barrels per day − down from about 1 million bpd for the same period last year, data showed.

Quarterly spending, meanwhile, rose 5 per cent year-on-year to more than 6 billion rials, mainly driven by “increased development expenditure compared to the same period in 2024”, the ministry said.

Development expenditure during the period increased 37 per cent on an annual basis to 688 million rials.

Oil market volatility

Oil markets have remained volatile this year amid US President Donald Trump’s push to slap tariffs on its global trade partners. The Israel-Iran war, which pushed the geopolitical tensions to new heights in the region and threatened crude supplies from the region, also added to global energy market uncertainty.

Oil prices started the year strongly, with the price of Brent, the benchmark for two-thirds of the world's oil, peaking at $82 a barrel on January 15, West Texas Intermediate, the gauge that tracks US crude, also hit its 2025 high of $79 per barrel the same.

However, geopolitical volatility and demand concerns, driven by a slowing global economy and less-than-stellar growth in China, the world's biggest crude importer, have dragged the crude prices lower this year.

Oil prices were trading higher on Wednesday, amid talks to end the war in Ukraine.

Brent was up by 0.73 per cent at 10.32am UAE time to $66.26 a barrel, while West Texas Intermediate was trading 0.37 per cent higher at $62.58 a barrel.

A souvenir shop in Muscat. Oman continues to focus on diversifying its economy away from oil. AFP

By the end of second quarter, Oman's Ministry of Finance also repaid outstanding financial obligations, with public debt reaching 14.1 billion rials, down from 14.4 billion rials at the end of the same quarter in 2024, it said.

Oman, like its peers in the GCC, has been pushing to diversify its economy away from oil, with investments in logistics, manufacturing, property and other sectors, to expand its non-oil economic base.

Under its economic and social reforms programme, the sultanate aims to reduce its dependence on oil income by 15 per of its gross domestic product by 2030 and further reduce it by 18 per cent by 2040.

It also announced the introduction of personal income tax starting in 2028, with a 5 per cent rate of tax on annual income exceeding 42,000 Omani rials, amid plans to diversify its revenue sources.

Growth prospects

The International Monetary Fund projects Oman’s economy to expand by 2.4 per cent in 2025 and 3.7 per cent in 2026, boosted by non-hydrocarbon activity especially in manufacturing and services.

“This expected performance is driven by the phase-out of Opec+ curbs and strong non-hydrocarbon growth, underpinned by ongoing investments in logistics, manufacturing, renewable energy, and tourism, but held back by the potential slowdown in key trading partners’ growth,” IMF said following a staff visit to the country in May.

Inflation remains low, edging up from 0.6 per cent in 2024 to 0.9 per cent year-over-year during January-April period, the IMF added.

Oman is part of Opec+ group, which has been unwinding production cuts since April, as the group focuses on regaining market share.