Oman reports record fiscal surplus in 2008

By Nadim Kawach on Wednesday, March 11, 2009

Link to Source: http://www.business24-7.ae/articles/...

Strong oil prices allied with higher crude output to boost Oman's fiscal surplus to a record high level in 2008 despite a sharp increase in actual expenditure, the Central Bank of Oman (CBO) reported yesterday.

The budget surplus totalled around RO1.58 billion (Dh15.2bn) and officials said it would allow the government to boost its reserves and cut debt.

But it was sharply lower than the surplus during the first 11 months of 2008, when it exceeded RO1.8bn. The decline was apparently caused by lower oil prices in December and the Gulf country push to support its State Reserve Fund by chopping off part of its oil revenues.

The record surplus last year was a result of a large increase in Oman's income, which climbed to an all time high of RO7,984.2m.

Spending also soared to a record RO6,404.1m during the year and more than 70 per cent of it was in current expenditure. The expenditure last year is nearly 23 per cent higher than the RO5.2bn actual spending in 2007, the figures showed.

Citing estimates by the Ministry of Finance, CBO put the country's oil income at around RO5,458m, more than 70 per cent of the total revenues. Gas earnings stood at RO913m.

Buoyed by the large surplus, Oman has joined Saudi Arabia in approving a record 2009 budget of RO6.424bn compared with a budgeted expenditure of RO5.8bn in 2008.

Revenues were also estimated higher at RO5.614bn in 2009 compared with projected earnings of RO5.4bn in 2008.

The increase in spending nearly doubled the forecast budget deficit to RO810m from RO410m in 2008.

A breakdown for the 2008 budget showed Oman suffered from a deficit of around RO399 million in December after spending surged to RO275m from RO195m in November and revenues dipped to nearly RO238m in December from RO904m in November. The decline was a result of a sharp fall in oil income, which dived to only RO19.3m from RO686m in the same period. The Central Bank gave no reason for the sharp drop.

In the first three quarters of last year, Oman's export income surpassed its total revenues of around RO5.9bn during 2007, according to CBO.

The oil price average of nearly $95 in 2008 was around 42 per cent higher than the $70 price average in 2007 while Oman's crude output continued to steadily rise in 2008 as it is pushing ahead with a major capacity expansion programme.

Oman's average oil production swelled to around 745,000 barrels per day in the second quarter of last year from around 707,000bpd in the first quarter.

The increase was in line with plans by the government to push up crude output to an average 790,000bpd in 2008 after a steep fall in output over the past five years because of lower than expected oil investment to fund gas projects.

Oman, which is not a member of the 12-nation Opec, pumped nearly 714,000bpd of crude oil in 2007, far lower than the 2002 peak of 898,000bpd. Production has steadily receded during that period, dropping from 328 million barrels in 2002 to 299 million barrels in 2003 and 285 million barrels in 2004. It reached 283 million barrels in 2005 and 269 million barrels in 2006.

Production dived to 259 million bpd in 2007 but the government said output would recover this year as it based its 2008 budget on higher oil production.

Last year, the government announced plans to invest nearly $10bn until 2011 to lift crude output capacity to 900,000bpd and increase gas supplies. Like other Gulf oil producers, strong oil prices have turned Oman's fiscal deficits into surpluses over the past five years and sharply boosted growth its economy, which galloped by nearly 13 per cent from about RO13.73bn in 2006 to RO15.5bn in 2007. Oman's proven oil and gas reserves were estimated this year at around five billion barrels and 30 trillion cubic feet respectively.