As the cut in expenditure fell short of the decline in revenues, the fiscal deficit stood at RO5,300mn in 2016, compared with RO4,361.4mn in 2015 (fiscal deficit as a percentage to GDP increased to 20.8 per cent from 17.2 per cent in 2015).
Fiscal deficit for 2016 was financed through a mix of instruments—about 73 per cent through external loans, and the remaining through drawing down from reserves and issuing domestic bonds.
The CBO report also stated that the total government revenue declined by 16.1 per cent to RO7,609.2mn in 2016 due to a substantial drop in oil revenues (actual price of Omani oil averaged at about $40 per barrel as against $45 per barrel considered in the budget estimates).
Oil revenue declined by 35.4 per cent to RO3,651.2mn in 2016, compared with RO5,656.2mn in 2015, mainly reflecting a steep decline in oil prices. On the contrary, the government revenues from natural gas, and other current receipts increased by 3.5 per cent, and 13.3 per cent, respectively, in 2016. Revenue from capital receipts and repayments also jumped 12.9 per cent and 508.8 per cent, respectively, in 2016.
Oil production, however, increased moderately to a recorded daily average of over 1 million barrels in 2016, up from 981,100 barrels in the previous year. Oil and gas revenues accounted for 68.2 per cent of government revenues and about 57.9 per cent of total merchandise exports (including re-exports) last year, noted the CBO report.
The government has adopted various policy measures to mitigate these challenges. In fact, both the Ninth Five-Year-Plan and Tanfeedh were drafted against this backdrop, and the 2016 budget being the starting year for both programmes, sets the platform for various reforms and initiatives, which would help in boosting economic activities in the private sector, containing the fiscal deficit, and fostering macro-economic stability.
The 2017 budget is targeting an accelerated pace of reforms, which, inter alia, include privatisation of government entities, increase in corporate income tax from 12 per cent to 15 per cent, and introduction of excise and VAT from 2018.
Total revenues are budgeted to expand by 14.4 per cent to RO8,700mn in 2017, from RO7,608.2mn in 2016, assuming a growth of 21.9 per cent in oil revenue and 7.4 per cent in non-oil revenue. On the other hand, total expenditure for 2017 has been estimated to decline by 9.4 per cent to RO11,700mn by reining in all constituents—a decline in current expenditure by 8.8 per cent, investment by 9 per cent, and participation and other expenses by 18.9 per cent.
Consequent to estimated higher revenue mobilisation, and significant rationalisation of expenditure, the fiscal deficit has been budgeted to drop to RO3,000mn in 2017, from RO5,300mn in 2016.