Oman appoints new finance minister in government restructuring push

Government reshuffle paves the way for fiscal reforms, analysts say

An illuminated sign #ExperienceOman can be see along the Mutrah Corniche in Muscat, the capital city of Oman.
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The appointment of a new finance minister and chairman of the country's central bank pave the way for fiscal and economic reforms, according to analysts. 

The changes, which were announced on Monday, clear the way action to be taken to tackle the country's budget deficit that has triggered a number of downgrades of its sovereign credit rating by major agencies. On Monday, Fitch cut Oman's credit rating for the second time this year to BB-.

"Sultan Haitham now has his own team and structure in place, rather than the one he inherited," Hasnain Malik, head of emerging and frontier equity strategy at Tellimer, told The National.

"Greater fiscal controls cannot be put in place a moment too soon."

Sultan bin Salem bin Saeed Al Habsi was named as Oman's new finance minister on Tuesday, replacing Darwish Al Balushi, while Sayyid Taimur Bin Asad became chairman of the Central Bank of Oman's board. These were part of a wide-ranging series of measures enacted through 28 royal decrees creating new ministries and renaming or merging others.

Fiscal reforms such as expenditure cuts are needed to ease the country's debt burden, analysts said.

"Oil price needs to double from here to get to fiscal break-even, which is very unlikely," Mr Malik said. "So, without serious spending cuts, an extra 15 to 20 percentage points is being added to the debt to GDP [gross domestic product] ratio annually.”

In the first five months of the year, Oman narrowed its budget deficit to 198 million Omani rials (Dh1.89 billion), compared to 358m rials in same period last year, according to a bulletin by the Central Bank of Oman.

"Such a reduction in deficit was largely because of [a] drop in expenditure of Civil [and] Defence Ministries … [as well as] receipts from some privatisation proceeds," Hettish Karmani, head of research at Muscat-based U-Capital, said. "The Sultanate is working on multiple fronts to ease doing business and bring in more foreign direct investment in the country."

The new appointments of the finance minister and central bank chairman, posts previously held by Oman's late ruler for the past 50 years, signal a shift towards a more inclusive government, according to analysts.

The appointments are "part of a broader restructuring of public administration, ostensibly geared towards greater delegation of executive responsibilities away from the Sultan”, Alexander Perjessy, vice-president and senior analyst at Moody’s, said. The move "has a potential to enhance transparency and effectiveness of decision-making”, he added.

Sultan Haitham has gradually made changes since he came into power, but the latest restructuring is the most significant yet.

In June, he set up a national committee to reduce the impact on the economy from the Covid-19 pandemic.

He has also established a Special Palace Office to oversee the civil ministries and created the Oman Investment Authority to attract foreign investors and manage the national wealth fund. The heads of both organisations report directly to him.

The Oman Investment Authority also restructured boards of 15 companies in its portfolio as part of a comprehensive review of its assets, in a move to boost efficiencies during the pandemic, it said in July.

The sovereign wealth fund has a portfolio of approximately $17.7bn (Dh65bn), according to Sovereign Wealth Fund Institute data. It is currently ranked the 35th-largest independent fund in the world, the institute's rankings show.