Oman is set to run a fiscal deficit for the first time in five years, after the state announced a 4.5 per cent rise in planned expenditure for 2015 – even as Brent futures fell to $57 per barrel.
Expenditure is set to total 14.1 billion Omani riyals (Dh134.5bn), while falling oil prices mean that total revenue will be cut by 1 per cent to 11.6bn rials. About 79 per cent of Oman’s revenue comes from oil.
Oman will run a deficit of 7.8 per cent of GDP in 2015. That is considerably larger than 2009’s deficit of 0.3 per cent, and represents a marked deterioration in the state’s finances since 2013, when Oman ran a budget surplus of 8.1 per cent of GDP.
Oman has been considering a range of measures to boost revenues, including cuts to energy subsidies and 2 per cent tax on expat remittances, as low oil prices weaken the country’s fiscal position. However, Oman decided against including the remittances tax in its 2015 budget, with government officials arguing that it could harm investment, according to The Times of Oman.
No plan to cut energy subsidies has been announced, despite statements from Omani central bank governor Hamood Al Zadjali in October, in which he indicated that this was under consideration.
Oman followed Saudi Arabia in sticking to spending plans in spite of oil’s decline. Saudi Arabia said last week it would continue its programme of infrastructure investment, while forecasting a budget deficit equivalent to 20 per cent of revenues in 2015.
Abu Dhabi and Dubai are yet to announce budgets for the forthcoming fiscal year, but ministers have said that falling oil prices would not force the government to cut spending.
In June, ratings agency Standard and Poor’s ranked Oman and Bahrain as the Gulf states most vulnerable to a fall in oil prices.
Oman has a fiscal break-even price of $89 per barrel, according to S&P. Forwards contracts for the price of Brent, which indicate market expectations of the commodity’s future price, suggest that oil will rise to around $70 per barrel by 2017.
Oman’s hydrocarbons are likely to last a further 21 years – considerably shorter than Saudi Arabia’s 66 years of reserves, or the UAE’s 81 years, according to data from the 2014 BP Statistical Review of World Energy.
Oman will be forced to issue new sukuk in a bid to finance future spending, Moody’s Investor Service said last month.
The country had outstanding sovereign debt equivalent to 8 per cent of GDP last year, according to the IMF, which predicts net indebtedness will grow to 10 per cent of GDP by 2017 – before the impact of falling oil prices is taken into account.
In December, S&P cut its outlook for Oman’s credit rating from stable to negative. The country has a credit rating of A – below Saudi Arabia’s AA– rating, and the UAE’s AA rating.
Oman’s reserves will partly insulate the country from oil price shocks. Oman’s largest sovereign wealth funds, the State General Reserve Fund and the Oman Investment Fund, hold reserves of about $19bn, according to the Sovereign Wealth Fund Institute – equivalent to 21 per cent of Oman’s GDP.
Its reserves are considerably lower than those of its wealthy Gulf neighbours, however. Saudi Arabia holds reserves equivalent to 100 per cent of its GDP, while the UAE has reserves equivalent to about three times the country’s annual output.
“The drop in oil prices will hurt performance in the near term, even if the Gulf’s buffers are powerful enough to ensure there’s no crisis,” Simon Williams, HSBC’s chief economist for Eastern Europe and MENA, told Bloomberg News.
“The region has had 10 years of abundance, but that decade of plenty is done,” said Mr Williams.
abouyamourn@thenational.ae
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
360Vuz PROFILE
Date started: January 2017
Founder: Khaled Zaatarah
Based: Dubai and Los Angeles
Sector: Technology
Size: 21 employees
Funding: $7 million
Investors: Shorooq Partners, KBW Ventures, Vision Ventures, Hala Ventures, 500Startups, Plug and Play, Magnus Olsson, Samih Toukan, Jonathan Labin
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
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%3Cp%3E1.%20Protracted%20but%20less%20intense%20war%20(60%25%20likelihood)%3C%2Fp%3E%0A%3Cp%3E2.%20Negotiated%20end%20to%20the%20conflict%20(30%25)%3C%2Fp%3E%0A%3Cp%3E3.%20Russia%20seizes%20more%20territory%20(20%25)%3C%2Fp%3E%0A%3Cp%3E4.%20Ukraine%20pushes%20Russia%20back%20(10%25)%3C%2Fp%3E%0A%3Cp%3E%3Cem%3EForecast%20by%20Economist%20Intelligence%20Unit%3C%2Fem%3E%3C%2Fp%3E%0A
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
ICC Awards for 2021
MEN
Cricketer of the Year – Shaheen Afridi (Pakistan)
T20 Cricketer of the Year – Mohammad Rizwan (Pakistan)
ODI Cricketer of the Year – Babar Azam (Pakistan)
Test Cricketer of the Year – Joe Root (England)
WOMEN
Cricketer of the Year – Smriti Mandhana (India)
ODI Cricketer of the Year – Lizelle Lee (South Africa)
T20 Cricketer of the Year – Tammy Beaumont (England)