A large cumulative fiscal surplus caused by strong oil prices and higher gas earnings slashed Oman’s debt by more than 25 per cent in five years and the debt could plunge further this year, according to a Kuwait bank.
Despite a sharp fall in oil prices this year, Oman could still record a surplus in its budget, while its economy is projected to grow and inflation decline, Global Investment House (GIH) said in a 60-page study on Oman.
As oil prices have maintained their upward trend during 2003-2008 and Oman stepped up efforts to boost crude output, assumed budget deficits turned into large surpluses, which soared by nearly 18.5 per cent during that period.
“The improved fiscal position over the years has allowed the government to reduce public debt from 13.9 per cent of GDP in 2004 to 4.2 per cent by the end of 2008.
“In absolute terms, public debt continued to decline significantly over the past five years to report an annual fall of 7.5 per cent over the period,” the study said.
It cited official data as showing public debt declined from OR1.3 billion (Dh12.5bn) in 2004 to OR964.8 million in 2008, depressing debt servicing from OR447.7m to OR354.3m in the same period.”
Oman, which is not an Opec member, reported a record budget surplus of OR272m in 2008 after oil prices soared to an historic high of $147 in late July to push up the average price to a record $95 through the year.
The Gulf country had assumed a deficit of around OR400m but it was wiped out by a surge in its revenue to an all-time high of OR7.82bn last year compared with projected earnings of OR5.4bn.
Despite the sharp drop in crude prices, the government approved record expenditure for 2009 in a bid to cushion the impact of the global fiscal crisis.