​OMAN: IMF forecasts fiscal surpluses from 2022 and sharp declines in debt

GULF COUNTRIES - In Brief 12 Sep 2021 by Justin Alexander

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The IMF completed an Article IV mission to Oman in early July and its Executive Board concluded the consultation today with a statement and publication of the full Article IV Report for the first time. This is a quick assessment and we may provide further updates after digging through more of the details in the report. The headline forecasts are for a reduction in the deficit to just -2.4% of GDP this year, from -19.3% in 2020, and with small surpluses thereafter. As a result, it sees government debt easing to just 47% of GDP by 2026, down from 81% in 2020. This includes a decline in external debt to just 26% of GDP, or $25bn, which would be the lowest since 2016 and less than half its current level. In addition, it sees the current account deficit easing to -6.2% of GDP this year and then to an average of just -1.0% in 2022-26. If the result turns out anywhere close to these forecasts, it would be a dramatic change for a country that had been mired for years with large twin structural deficits, not least amidst a pandemic that has shaken the non-oil economy.(Here is the core IMF forecast data in Excel: 210912_IMF_Oman_Article_IV_forecasts.xlsx) We have been firmly bullish on Oman since Sultan Haitham’s succession in January 2020 and the serious reform effort that we anticipated has indeed materialised, spanning VAT, subsidy cuts and spending controls, including public sector salaries. Permitting the IMF to published its Article IV is another signal of openness to reform. However, we are not quite as optimistic as the IMF. It appears as if the Fund’s forecasts assume that oil and gas costs will have borne by Energy Development Oman for the full year, as was planned in ...