Oman’s Public Debt Declines to 35% of GDP in 2023

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In Oman, sustained fiscal reforms and favorable oil prices have led to a substantial reduction in public debt, declining from nearly 70% of GDP in 2020 to 35% in 2023. The government’s prudent spending practices, along with higher-than-expected oil prices, contributed to a decreased debt-to-GDP ratio compared to 2022 when it stood at 40%. This positive trend has positively impacted Oman’s sovereign credit ratings.

The prolonged deficits in Oman’s general budgets since 2014, caused by falling oil prices, resulted in increased public debt, reaching almost 70% of GDP in 2020. In August of the previous year, the Ministry of Finance identified a safe debt limit of 30% of GDP to ensure the government’s ability to meet debt obligations and sustain economic growth.

As part of the Liability Management Exercise and Public Debt Reduction initiatives, the preliminary results of the 2023 budget demonstrate significant achievements. Public debt was successfully reduced from RO17.6bn in 2022 to RO15.2bn at the end of 2023, representing a repayment of approximately RO2.4bn. This resulted in a decreased public debt ratio of 35% by the end of 2023.

The 2023 budget also revealed a substantial surplus of approximately RO931mn, contrary to the initially projected deficit of RO1.3bn. Contributing factors include higher oil prices, ongoing fiscal consolidation measures, and a reduction in public debt service costs.

For 2024, Oman’s budget aims to prioritize reducing public debt in line with the 10th Five-Year Development Plan (2021-2025) and Oman Vision 2040. The budget estimates a fiscal deficit of RO640mn, equivalent to 6% of total revenue and 1.5% of GDP. The deficit will be financed through internal and external borrowing by RO240mn, with the remaining covered by drawing on reserves. The government is committed to not borrowing or withdrawing from reserves if higher public revenue generates a fiscal surplus. However, borrowing may occur to replace high-cost loans with low-cost alternatives.