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Oil Boosts Oman Budget

by Mary Swire,, Hong Kong

06 January 2012

In the first 10 months of 2011, Oman achieved a budget surplus of OMR830.1m (USD2.2bn), mostly due to higher oil prices. However, the budget is expected to dip into deficit in 2012 as oil prices soften and expenditure is forecast to increase.

Oman has managed to stay largely unaffected by the economic fallout from the eurozone debt crisis as it exports most of its oil to fast-growing Asian countries. Oman sold its oil at an average price of USD102.4 per barrel, higher than the price forecast in their previous budget. The surplus in the first ten months of 2011 was equivalent to about 3.7% of the previous year's nominal gross domestic product.

The recently-announced 2012 budget, worth some USD26bn, builds upon plans to create some 36,000 jobs in the public sector and the military as well as 2,000 new positions within government-owned companies. Unemployment is, however, a large problem in Oman; approximately 45,000 new positions need to be created each year for Omanis to absorb widespread unemployement, according to the International Monetary Fund.

Money will also be put towards new infrastructure projects such as a rail network and airports. It is hoped that this will help to sustain growth over the medium-term as well as tackle the unemployment problem.

Planned expenditure in the new budget reaches OMR10bn; but with revenues expected to reach OMR8.8bn, a deficit of 5.4% is forecast. This is based on the average oil price of USD75 per barrel. This is a cause for concern for Oman, for any further falls in oil prices could drastically threaten the budget.

TAGS: fiscal policy | energy | public sector | gross domestic product (GDP) | budget | oil and gas | unemployment | Oman

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