Oman unveils new budget and

five-year plan with focus on growth

Oman launched its 10^th five-year plan and budget for 2021 – two key drivers that will revive itseconomy and create jobs.

The Ministry of Finance expects public spending under the Sultanate’s budget to reach OMR10.88 billion, with revenues coming in OMR8.6 billion, leaving a deficit of OMR2.24 billion.

Oil and gas industry revenues would reach OMR5.4 billion, or 63% of the total. A further breakdown shows oil will generate OMR3.6 billion (41%) and gas will generate OMR1.8 billion (22%) of the total revenues during the year.

Non-oil sources of income will account for 37% of total revenues, or OMR3.2 billion, with taxes generating51% of non-oil revenues.Oman is set to implement a 5% value added tax (VAT) starting April 2021.

The 2021 budget is based on an assumed oil price of USD 45 per barrel.

On the expenditure side of the ledger, current expenditures will make up 83%, or OMR9.02 billion, of total spending, with OMR900 million (8%) allocated for investment-related expenditure, while subsidies and other concessions will make up the remaining OMR960 million (9%) of total.

The budget also takes into account the priorities of the newly released Oman Vision 2040, said Sultan bin Salem Al Habsi, the minister of finance.

“In order to achieve fiscal balance, the government has changed its strategies in dealing with the current situations,” said the minister in this year’s budget guide, released by the Ministry of Finance.

Some of the key themes of the budget were economic diversification; financial sustainability;boosting of the private sector, investment and international co-operation; and governance of the state's administrative apparatus, apart from focus on resources and projects, welfare and societal protection.

“The budget has been prepared in consistency with the fiscal framework of the Tenth Five-Year Plan, and in a way that leads to achieving national priorities and fiscal sustainability,” Al Habsi noted in the report. “A sustainability that is based on higher non-oil revenues and an optimal level of public spending.

“The 2021 budget outlines a ceiling for all government units, where the budget of each unit should not exceed the revised budget for the financial year of 2020,” he added.

FIVE-YEAR DEVELOPMENT PLAN

The Ministry of Economy also outlined the 10^th Five Year Development that sets out 14 national priorities, 88 strategic goals and 68 performance indicators.

The ministry stated that 10th Five Year Development Plan was developed at a time of adverse, exceptional conditions, including the decline in international oil prices and the impact of the coronavirus, which forced the entire global economy in lockdown and disrupted economic activity.

“The collapse of oil prices brought about negative impact on human development, global recession, a surge in the general debt vis-à-vis the GDP that pulled down the country’s credit rating and increased the rate of borrowing and caused a decline in the contribution of the private sector to economic activity,” the ministry said.

But the new plan aims to set out clear-cut national approaches linked to timed executive programmes to help revive the economy, according to the ministry.

“It also restored economic growth, accelerated the rate of economic activities and achieved a balanced ratio of economic and social development through the execution of programmes, initiatives and proposed projects within a comprehensively regulated timeframe.”

The five-year plan envisages oil prices to average around USD 48 per barrel, which would help reduce the government’s deficit over the next few years and fund major diversification projects.

Overall, real GDP growth is expected to grow 3.5% annually during the five-year period, while investment will stand at 27% of GDP, with foreign direct investment in both oil and non-oil sectors accounting for 10% of the GDP by the end of the plan.

NON-OIL’S CONTRIBUTION

The five-year plan also envisages non-oil GDP to average around 3.2% annually, led by high-tech industries, agriculture, fisheries, food processing, transportation, storage and logistics.

“The plan also targets increasing the contribution of the private sector to economic activities of high in-country value, the completion of value, production and import chains, the motivation of small and medium enterprises by encouraging innovation, knowledge-based economy, fourth industrial revolution (4IR) applications, artificial intelligence, specialised markets and risk capital and generating decent employment for Omani youth, notably in the entrepreneurship field,” the ministry said.

These plans and initiatives are expected to breathe new life into the economy and set out a clear roadmap for the Omani authorities to chart the next stage of the Sultanate’s growth.