Oman Booming: RO 1.45bn surplus
By staff - Sat Jun 23, 5:29 am
Oman posted a record budget surplus of RO 1.45 billion in the first four months of the current year aided by surging oil revenues. The surplus is equivalent to about 5.3 per cent of the Sultanate”s 2011 nominal gross domestic product. Total revenue during the same period from January to April, 2012 jumped 40 per cent to RO 4.59 billion, or 52 per cent of the initial full year projection, according to statistics available from the Ministry of Finance.
Spending increased by 26 per cent year on year to RO 3.1 billion in the same period. Net oil revenues surged 35 per cent in January-April from a year earlier to RO 3.26 billion. Oman sold its oil at an average price of $109.1 per barrel, up from $88.4 in the first three months of 2011.
“The Sultanate has managed to almost level this year’s estimated budget deficit of RO 1.2 billion in the first quarter itself, backed by the better than expected oil revenues. This is positive for industrial companies as they are likely to witness more favourable demand side supported by increase in spending on projects”, says Suresh Kumar, Head of Research at Al Maha Financial Services.
In investment expenditure, RO 258.7 million was spent on oil production expenditure while RO 87 million was spent on gas production during the same period. Infrastructure investment size during the Eighth Five Year Plan stands at RO 30.487 billion, while the allocation towards various development projects in roads, ports, housing, airports and health has reached about RO 12 billion.
The government is expected to spend an average of RO 2 billion per year over the next five years on infrastructure projects. From the beginning of the current year, the Board has so far awarded tenders worth RO 604 million for various projects. This augurs positive for the local engineering and contracting, cement and oil marketing sector over the medium to longer term, adds Suresh. The same opinion has been echoed by Joice Mathew, Senior Manager, Research, United Securities.
“The government is focusing on developing the country’s infrastructure like never before. This should be read in conjunction with the Vision 2020, which envisages the reduction of Oman’s reliance on oil income for economic growth. The last couple of years witnessed government spending on infrastructure development at the highest level in the country. The expansion of airports and sea ports that are being carried out currently are speaking evidences to this”, says Joice.
While most economies witnessed a slowdown in the face of US debt and euro zone crisis, in Oman the continuing excellent performance of the economy holds out a promising outlook. The average price of $ 75 per barrel used in 2012 budget, higher by 29.3 per cent than the one used in 2011 budget is the highest in the country’s history. It can be seen as a calculated strategy bearing in mind the multiple factors which are influencing the oil prices as they are not limited to demand supply formula but to the other external factors.
From the beginning of the current year, the Tender Board has awarded tenders worth RO 604 million for various projects. “Construction and infra companies are the direct beneficiaries of this spending. Apart from the local companies, we have seen an increased number of foreign players participating in the tendering process. The overcapacity of foreign companies in their home markets are forcing them to search for other lucrative markets and Oman stands a lucrative target given the increase in infra spending. Healthy competition between incumbents and new entrants should result in optimal use of resources and introduction of better technology apart from cost effective implementation of the project”, says Joice. “The increased infra spending by the government is helping in creation of direct and indirect employment opportunities”, he adds.