Oman budget in deficit in Q1

A surge in public expenditure plunged Oman back into a fiscal deficit in the first quarter of 2011 despite a sharp increase in revenue because of higher oil prices and production, according to Omani government data.

The shortfall was in contrast with a large surplus recorded in the first quarter of 2010 although the balance is projected to end this year in a surplus on expectations crude prices would remain high.

Figures by the Omani ministry of economy showed the budget suffered from an actual surplus of RO253.4 million ($659 million) in the first quarter against a real surplus of RO421.2 million ($1.09 billion) in the first quarter of 2010.

A breakdown showed the gap was created by a sharp rise in spending to nearly RO1.718 billion ($4.46 billion) in the first quarter of 2011 from around RO1.574 billion ($4.09 billion) in the first quarter of 2010.

The deficit occurred despite high growth in the Gulf country’s revenue to nearly RO2.3 billion ($5.98 billion) from RO1.99 billion ($5.17 billion) in the same period. Most of the increase was in oil export earnings, which surged by nearly 22 per cent to RO1.742 billion ($4.52 billion) from RO1.42 billion ($3.69 billion).

The surge in the oil income was caused by a steep rise in crude prices which averaged nearly $100 in the first quarter of 2011 compared with $74 in the first quarter of 2010. Oman’s oil production also swelled to around 880,000 barrels per day from nearly 860,000 bpd in the same period.

In a report this month, a key Arab League organization expected Oman’s budget to end this year in surplus because of higher oil earnings.

Oman, which is not an OPEC member, had projected a shortfall of RO850 million ($2.2 billion) when it announced its record 2011 budget early this year.

But it massively revised up the gap to RO1,850 million ($4.8 billion) after Sultan Qaboos approved new jobs and hefty pay rises for Omani government employees in response to demands during unrest in two months ago.

“Preliminary actual data for 2010 showed that Oman’s budget recorded a surplus of 3.2 per cent of GDP against a deficit of 3.1 per cent in 2009,” the Abu Dhabi-based Arab Monetary Fund (AMF) said in its quarterly bulletin.

“Initial estimates show that the surplus will expand this year compared with the previous fiscal year due to higher oil revenue….the surplus will increase despite a large rise in public spending announced by the government for this year.”

In its latest report, Oman’s central bank said that the budget deficit for 2011 was revised up following approval of extra spending in April.

The central bank said the 2011 budget was based on an average oil price of $58 and production of 896,000 barrels per day.

Experts expect Oman to exceed that output target this year while oil prices could average nearly double the level forecast in the Omani budget.

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