Oman closed the month of February with a budget surplus of 210 million Omani rials, or $546 million, according to the Ministry of Finance. This increase is mainly due to the doubling of oil prices in recent months as a result of the sanctions against Russia, the world's second largest energy exporter, after it began its invasion of Ukraine.
As a result, the Gulf country recorded an 81% year-on-year increase in net oil revenues to 1.09 billion rials during January and February. Oman sold its crude oil at an average of $81 per barrel compared to $42 per barrel a year ago, according to the ministry's monthly bulletin. In addition, average oil production also increased to more than one million barrels per day.
The surplus, which was also achieved through VAT revenues and higher oil and gas receipts, also aims to "reduce the fiscal deficit and minimise the cost and risks of its debt portfolio", according to the Finance Ministry, which Oman's own ruler, Sultan Haitham, has also emphasised. He said the country planned to use these revenues to "reduce public debt and support spending on government projects". This would be done without affecting commodity prices in the country.
Although these plans remain future plans for the Sultanate in the coming months, the effects of this surplus can already be seen in the data collected by the monthly bulletin which shows the increase in public spending of 10.2% year-on-year, some 1.7 billion rials. Oman has prioritised a development project in which to invest part of this surplus: more of the government's development budget will be allocated to infrastructure projects, another 23.5% will go to social services, 15% to services such as housing and tourism, and another 7.7% will go to goods production.
However, the main objective of the Ministry of Finance is to reduce public debt by more than 2.85 billion rials by the end of April 2022, while preparing to repay 1.36 billion rials worth of loans by the end of this month.
This comes on the back of rising crude oil prices, which reached a 14-year high this March, a very propitious scenario for the Sultanate after years marked by the impact of the COVID-19 pandemic and even the collapse of oil prices in 2014. This sensitivity to oil price fluctuations is marked by the fact that Oman is a relatively small oil producer compared to neighbouring Gulf countries, which makes it a little more sensitive to these cost fluctuations.
Despite this, the data obtained during these first months of 2022 in the Omani economy have caused agencies such as S&P Global Ratings to raise the country's long-term local and foreign currency credit rating to 'B+' from 'BB-' for the first time. This rating, which implies that the issuer is less vulnerable in the short term, was set in line with higher oil prices, increased hydrocarbon production and the government's fiscal reform programme.
The US agency expects Oman's economy to grow in 2022 and 2023 with GDP expansion of nearly four per cent this year, moderating to in subsequent years, even taking into account other sources of revenue. "Over the next three years, we expect the non-oil sector to be the main driver of growth. We forecast non-oil growth to average 2.2 % between 2023 and 2025," the agency says.