Oman to cover two-thirds of budget deficit with foreign debt

The government posted a budget deficit of 4.02 billion Omani rials in the first seven months of 2016 compared with a deficit of 2.39bn rials a year earlier

Oman’s government is covering between 60 and 70 per cent of this year’s budget deficit via international borrowing such as eurobond issues, direct placements of debt and other instruments, the central bank’s executive president said.

The rest of the deficit will be financed locally by drawing down financial reserves, such as money held by the State General Reserve Fund, a sovereign fund, and issues of bonds, Hamood Sangour Al Zadjali told an economic conference on Monday.

The reliance on international financing is a big shift for Oman, which has seen its state finances severely damaged by low oil prices. Earlier this year, the government returned to the international bond market for the first time in two decades.

The budget deficit almost doubled to 4.02 billion Omani rials in the first seven months of this year from a deficit of 2.39bn rials a year earlier, as low oil export prices slashed state revenues.

The original 2016 budget plan envisaged state expenditure of 11.9bn rials and revenues at 8.6bn rials. Officials said their 2016 economic plans assumed an average oil price of US$45 a barrel.

Mr Zadjali said on Monday that Oman did not plan any more international borrowing this year, but that the government would issue 150m rials of domestic bonds in December, bringing total domestic bond issuance this year to 450m rials.

Senior officials also described long-term plans to raise fresh money for the government and strengthen the economy in an era of cheap oil.

The government expects to raise 2m rials in the next five years by privatising some companies, said Sheikh Abdullah Salem Al Salmi, executive president of the Capital Market Authority.

He said that state-owned Muscat Electricity Distribution expected to sell 50 per cent of its shares in an initial public offer by the end of this year.

Minister of commerce and industry Ali bin Masoud Al Sunaidy said the government would accelerate a drive to diversify the economy and create non-oil jobs, offering private companies opportunities to partner with the government on projects.

* Reuters

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