Tuesday, July 23, 2024
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Muscat – Based on studies and risk analyses conducted by the Micro Fiscal Unit of the Ministry of Finance, Oman’s safe debt limit has been estimated at 30% of GDP, enabling the government to meet debt obligations and sustain economic growth.

Due to a fall in oil prices since 2014, the sultanate’s general budgets recorded deficits for more than eight years, compelling Oman to finance these deficits by borrowing from local and external institutions. Consequently, public debt increased to 67.9% of GDP in 2020.

‘There was an urgent need to adopt prudential fiscal policies with the aim of reducing public debt and achieving fiscal balance so as to absorb any potential financial shocks. So, the Ministry of Finance set out a public debt management strategy and conducted a study to identify the safe debt limit,’ the ministry said in its monthly Fiscal Performance Bulletin on Sunday.

With the implementation of prudent fiscal policies and increased oil revenues over the past two years, Oman successfully reduced its public debt to 40% of GDP at the end of 2022.

The safe debt limit varies from country to country, depending on economic characteristics, current economic conditions, economic growth projections, and other indicators. By the end of H1 2023, the Ministry of Finance had repaid more than RO1.5bn of its public debt, thereby reducing the sultanate’s total public debt to RO16.3bn as of June 2023.

The Ministry of Finance did not withdraw from reserves this year as planned earlier due to the generation of additional revenue, the Fiscal Performance Bulletin reported. In recent years, Oman has succeeded in reducing public debt and costs associated with debt servicing, thus minimizing risks within its debt portfolio.

‘This is a result of several measures and initiatives that focused on rationalizing public spending and increasing public revenue,’ the ministry stated. Higher oil prices and the allocation of additional revenues towards repaying government loans also contributed to debt reduction.

Oman posts RO656mn surplus till June

Oman has reported a budget surplus of RO656mn in the first half of 2023 compared to the RO784mn surplus recorded in the corresponding period of 2022.

According to the Fiscal Performance Bulletin issued by the Ministry of Finance, total public revenues amounted to RO6.342bn in the January–June period of 2023, down 6% compared to RO6.725bn registered in the same period in 2022.

Oman’s net oil revenue this year increased 2% to RO3.257bn compared to RO3.187bn recorded in the same period in 2022. Net gas revenue of 2023 amounted to RO1.115bn, down 36% compared to RO1.729bn registered in 2022.

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