Oman’s year-to-date budget deficit was 890.2 million rials ($2.32 billion) in May 2021, according to the Ministry of Finance, as low oil prices and decreased crude output placed pressure on the small Gulf producer’s finances, according to Reuters.
Oman is considered as the financially least robust country in the region, with a much smaller oil industry comparing to its other Gulf neighbors, making it more sensitive to price changes in hydrocarbons, which accounted for approximately a third of its GDP in 2019.
Oil income fell by 23% in the first five months of this year compared to the same period in 2020, according to the ministry. Total revenue, including non-oil income, was down by 19%.
In the year to May, spending was down 2.9% on an annual basis.
Oman has cut public spending to decrease its budget deficit, although the rate of adjustment is slower than the income decline.
“Public spending continues to decline as fiscal consolidation continues”, the ministry stated.
According to the ministry, GDP at current prices fell by 2.5% in the first quarter, pressured by a 20.6% decline in oil activities, while the non-oil sector was up by 5.7%.
In October of last year, Oman announced a medium-term fiscal strategy, which reassured investors and enabled the Sultanate to secure billions of dollars in loans and bonds this year. It raised $1.75 billion in Sukuk, or Islamic bonds, last month, attracting $11.5 billion in demand.
Oman’s economic performance has substantially deteriorated amidst the COVID-19 pandemic. Falling government incomes and growing budget deficits and unemployment became a chronic problem of the country.