Oman Has No Plans To Cut Spending As Oil Slides -Minister

Oman has no specific plans to reduce state spending this year, its minister for financial affairs said on Wednesday, despite the plunge in oil prices to well below the level assumed in its government budget.

“There are no specific plans to cut public expenditure at this time. We are observing the situation closely and the oil prices are still fluctuating,” Darwish al-Balushi told Reuters.

“When needed, steps will be taken to maintain the economy’s performance,” he added without giving details.

In its 2015 budget plan, released last week, the finance ministry said it would raise state spending by 4.5 per cent from last year’s original plan to OMR14.1 billion ($36.6 billion).

Revenues this year were projected at OMR11.6 billion, down one per cent, leaving a budget deficit of OMR2.5 billion – Oman’s biggest fiscal gap since at least 1990.

Balushi said on Wednesday that the budget assumed oil prices would average $75 per barrel this year. The price of Brent crude oil slipped below $50 per barrel on Wednesday, to its lowest level since April 2009, after a roughly $66 drop over the past six months.

In November an advisory body to Oman’s government suggested sweeping spending cuts and tax rises to cope with the reduction of oil revenues, including a levy on liquefied natural gas exports, a royalty on the revenues of telecommunications operators, and a hike in royalties paid for mineral exploitation.

Balushi did not say on Wednesday which if any of the revenue-raising steps had been adopted. Last month, Omani cement firms said the government would double the natural gas charges which they pay. A proposal to tax foreign workers’ remittances was rejected.

Asked about a drop in the projected fuel subsidy cost to OMR580 million in the 2015 budget from OMR860 million in 2014, Balushi said: “It had to do with the drop in oil prices only, not any subsidy cuts.”

The minister had told Reuters last October that the government was likely to start cutting some state subsidies in 2015 to save money. But any subsidy reductions would be politically sensitive.

Last year the government announced plans to restructure loss-making state carrier Oman Air; it was to spin off some of its business units into separate companies.

Balushi said on Wednesday: “It will happen this year. The plan for the year will be announced one week from now in a grand gathering.”