MUSCAT: Oman’s budget deficit could be around OMR4.3 billion and OMR6.8 billion this year, if the average oil price hovers around $60 per barrel and $40 per barrel, respectively, according to an economic outlook report for GCC countries released by a leading bank here the other day.
This is against a deficit projection of OMR2.5 billion at an estimated expenditure of OMR14.1 billion and revenue of OMR11.6 billion in the state budget. Economic prospects for 2015 are fine, assuming that the governments to continue the expansionary budget.
However, the deficit will be much lower at OMR1.8 billion if the average oil price hovers around $80 per barrel and the country could end with a OMR700-million surplus, if the average price reaches $100 a barrel, ahlibank’s asset management division said in a report.
The report suggested that Gulf Cooperation Council (GCC) states should prepare themselves for a period in which budget deficits will occur, assuming current levels of spending is maintained. And Oman should utilise this opportunity to develop the bond and sukuk markets within the region.
The report noted that the avenues for meeting deficit could include surplus brought from previous year, issuance of sovereign bonds and sukuk, drawing from reserves, bilateral loans and grants, proceeds from privatisation, rationalisation of subsidies and introduction of new and increase in existing taxes and fees.
According to the report, if the average oil price stands at $80 per barrel, Oman will have a deficit to gross domestic product ratio of 6 per cent, while it is 14 per cent if the oil price goes down to $60 a barrel.
In order for GCC states to continue existing levels of spending (without resorting to debt financing), the desired level of oil price is $80 per barrel. Also, at $60 per barrel, some of GCC states such as Bahrain, Oman and Saudi will be forced to rationalise their expenditures.
ahlibank report also noted that public debt issuance might increase across GCC. “But we do not expect this to be the only source of deficit financing.”
The report said that oil prices have declined by 58.9 per cent over the last 206 days. There has been an increasing global supply, mainly from shale producers and re-emerging Opec producers such as Libya and Iraq.
Global demand for crude is estimated at 93.3 million barrels per day, which indicates a supply glut of 1.2-1.8 million barrels per day, according to United States Energy Information Adm
