OMAN: 2022 budget looks promising, despite some slippage in consolidation
Oman’s budget was released on Sunday, building on headline numbers announced a few weeks ago, along with more details of the preliminary 2021 outturn. Broadly speaking, the 2021 results and the 2022 budget show the government’s continued seriousness about fiscal consolidation, even after the unexpected windfall of higher oil prices. Although there has been slippage from targets in some areas, these do not yet raise serious concerns and, provided of course that oil prices remain favorable, a balanced budget could be nearly within reach, several years ahead of schedule in the fiscal balance plan.
Revenue outturn
• Higher oil revenue was of course the main reason for revenue coming in well above budget, as prices averaged $61 compared with the budget’s assumption of $45. Production is reported to have averaged 957k b/d, nearly precisely on budget (this may be an undercount given that output already averaged 960k in Jan-Oct and Oman participated in the OPEC+ tapering during the last two months of the year). Although the price was only 36% above budget, revenue was 56% higher because it is published net of costs.
Expenditure outturn
• The 2022 budget: The stated objectives of the budget include targeting subsidies to low-income households, enhancing non-oil revenue and improving the credit rating and investors’ confidence. The budget builds on a series of important changes to laws and systems to improve fiscal management, such as a new GFS system, the Treasury Single Account and the national register of government.
Budgeted revenue
• Oil revenue is very conservative given the $50 assumption, which is less than other Gulf states (Qatar $55, Saudi about $70). Given the way oil export prices have been set, Jan-Feb exports are already locked in at an average price of $74 and consensus forecasts for the year are well above that assumption. The Minister’s introduction to the budget said that the conservative oil assumption was used because of Omicron and that any additional revenue will be used to reduce the deficit and repay loans (not expand spending).
Budgeted expenditure
• The total allocated expenditure of OR12.13bn is down -0.3% on the preliminary 2021 outturn, although up by 11.8% on the 2021 budget and by 8.8% on the 2022 projection in the MTFP. The main reason for the increase is the surprising “gas purchase and transportation” line, mentioned above, which has more than doubled to OR1,600m, whereas the MTFP projected it at only OR850m. The other major source of overshoot comes from Civil Ministries, which are budgeted at OR4.3bn, which is in line with the preliminary 2021 outturn but 6% more than the 2021 budget and 9% more than the MTFP projection. However, it is still -6% below the 2020 outturn, and the projections made last year were unrealistic, particularly in a context that is both inflationary and in which the government has been under pressure to act to mitigate unemployment (74% of Civil Ministry spending is on salaries).
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