Reuters logo
UPDATE 1-Oman budget break-even oil price jumps in 2013
January 2, 2013 / 1:00 PM / 5 years ago

UPDATE 1-Oman budget break-even oil price jumps in 2013

* Finance minister says break-even at $104/barrel

* Economists estimated it around $83 in 2012

* Heavy spending planned on jobs, welfare, infrastructure

* Government posted 1 billion rial surplus last year

* Real GDP grew 8.3 pct in 2012, beating forecasts

By Saleh Al-Shaibany

MUSCAT, Jan 2 (Reuters) - Oman is banking on oil prices staying high this year to fund heavy spending on job creation and social welfare, according to plans released on Wednesday.

Finance Minister Darwish al-Balushi told a news conference that Oman, whose revenues come mostly from oil and gas exports, would need an oil price of $104 per barrel in 2013 to balance its state budget.

This ‘break-even’ oil price has been rising since scattered street protests over economic conditions and political issues in 2011 prompted aggressive government spending to head off potential social discontent.

Balushi did not give last year’s break-even price, but economists polled by Reuters estimated it at around $83, up from $66 in 2011. Brent crude oil was trading at $112 in global markets on Wednesday.

“Last year we created 36,000 jobs for Omanis by spending 300 million rials ($780 million),” Balushi said. “This year we will create 56,000 jobs, of which 20,000 will be in the government sector.”

The International Monetary Fund estimates that unemployment among Omani citizens may have exceeded 20 percent in 2010. Government officials say that estimate is far too high and that the number of registered unemployed was reduced by three-quarters to about 17,000 last year, in a population of roughly 2 million Omani citizens.

Strong economic growth is key to keeping down unemployment, and the 2013 budget plans indicate the government will keep spending high in many areas despite the growing risk of running a deficit if oil prices fall.

Oman envisages total state spending of 12.9 billion rials in 2013, up nearly 30 percent from its 2012 plan. Spending on investment, including ports, roads and facilities to produce oil and gas, is earmarked to climb 14 percent to 3.1 billion rials.

Actual state expenditure last year was about 13 billion rials. The government was able to overspend its budget by a large margin and still post a budget surplus of about 1 billion rials in 2012 because oil prices were high, averaging $109 per barrel instead of the $75 for which the country planned.

This year’s budget is based on an average oil price of $85 and envisages a deficit of 1.7 billion rials.


With state debt now totalling only about 6 percent of gross domestic product, according to the IMF, Oman would probably find it easy to run a moderate budget deficit through borrowing. But it is not believed to have the huge fiscal reserves enjoyed by some other Gulf oil exporters such as Saudi Arabia.

Balushi said last year’s budget surplus would be used to cover part of any deficit this year. Also, the 2013 budget sees the government borrowing 200 million rials domestically and 150 million rials from banks outside the country.

In 2011, at the height of the Arab Spring unrest, wealthy Gulf countries such as Saudi Arabia pledged $10 billion in aid to Oman over 10 years to help it develop.

The funds have been slow to arrive, but the budget statement said the government would count on them to help finance projects such as a railway, roads, and electricity and water facilities.

Balushi said on Wednesday that the heavy government spending had succeeded in lifting economic growth. Oman’s gross domestic product, adjusted for inflation, grew an estimated 8.3 percent last year, above the government’s 7 percent target, he said.

The rate was considerably higher than most economists had predicted; the IMF, for example, forecast in October that Oman’s economy would grow 5.0 percent in 2012.

Oman does not regularly release real GDP data. In 2011 its economy grew an estimated 5.4 percent, according to the IMF.

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below