Dubai: Oman’s government has responded to low oil prices by cutting spending on defence and subsidies while continuing to invest in diversifying the economy, official figures showed on Tuesday.
The plunge of crude prices since last year has slashed the government’s net oil revenues, which shrank 35 per cent from a year earlier to 1.67 billion Omani riyals (Dh15.86 billion, $4.35 billion) in the first quarter of this year, provisional finance ministry data showed.
This is a serious blow to Oman, which lacks the ample fiscal and hydrocarbon reserves of its wealthier Gulf neighbours. The government swung to a budget deficit of 544.6 million riyals in the quarter from a 215.4 million riyal surplus a year ago.
But the government is continuing to spend on infrastructure and economic development projects, such as roads, ports, airports and industrial facilities, that it hopes will broaden the economy and eventually reduce its dependence on oil.
Public investment spending rose 2.3 per cent to 555.4 million riyals, with investment in oil production declining slightly and investment in natural gas production increasing 35 per cent.
Meanwhile, current spending on defence and national security dropped 25 per cent to 567.3 million riyals. Spending on “participation and support”, which includes subsidies, fell 48 per cent to 189.0 million riyals; the government raised domestic natural gas prices on Jan. 1 to save money.
Current spending on civil ministries climbed 9.8 per cent to 896.4 million riyals, suggesting the government has not so far been able to restrain lavish employment of local citizens in state jobs, a big drain on its finances.
Oman’s 2015 budget plan, announced in January, envisages government spending of 14.1 billion riyals and a deficit of 2.5 billion riyals, assuming an average oil price of $75 per barrel.
