MUSCAT: Oman plans to stick to its spending plan this year and the budget deficit is likely to be smaller as oil prices seem to stay higher than estimated, the Gulf country’s finance ministry official said on Sunday.
The small non-OPEC crude producer largely overshot its original expenditure plans in the past two years to help the economy ride through the global downturn. However, inflationary pressures are on the rise again this year.
Oman has used nearly 63 percent of its 2010 budget in the first eight months, the official said, focusing on infrastructure and energy projects to boost economic growth.
"The government has spent 4.5 billion rials ($11.69 billion) so far in January to August from the 7.18 billion rial expenditure budget allocated for 2010 as part of our plan to meet all our spending commitments targeted for the year," the official, who declined to be identified, told Reuters.
The Omani cabinet surpassed expenditures budgeted for 2009 by nearly 16 percent, after more than 30 percent in the previous year. It has yet to publish budget data for August and July.
Omani policymakers use fiscal policy as a key tool to steer the economy as the country pegs its rial to the US dollar.
Oman set its 2010 budget with revenues of 6.38 billion rials and a deficit of 800 million based on an average oil price of $50 per barrel. Its budget surplus widened to 702.8 million rials at the end of June, data showed in August.
The Gulf Arab sultanate’s central bank warned in July that it needed to closely watch inflation in the second half as it could put the currency under pressure. Inflation climbed to a 13-month high of 3.5 percent year-on-year in June.
The official did not say whether a budget surplus was likely this year given substantially higher oil prices.
"It looks good so far. We don’t intend to exceed the deficit we planned for the year because the price of oil has so far favored the budget," he said.
"We sold our oil in August at an average price of about 30 percent above the figure we forecast for this year," he said.
Analysts polled by Reuters expected Oman to post a surplus of 3.8 percent of gross domestic product in 2010. The benchmark US crude oil prices fell for a fourth straight session on Friday to close at $73.66 a barrel.
The sultanate boosted its oil output for the second year running in 2009 and plans further gains this year. The crude income accounted for 67 percent of its total revenues last year.
The country produced an average of 812,500 barrels per day (bpd) of oil in 2009 compared to 756,800 bpd the year earlier, data from the economy ministry showed.
It is planning to spend around $3.5 billion in the next five years to increase oil output and generate cash for infrastructure projects.
Oman said in March it expected its GDP to jump 6.1 percent in 2010, helped by a recovery in oil prices, while the market is more pessimistic, betting on a 4.0 percent rise.