Net revenue from oil exports surged 56 per cent in 2021, buoyed by a strong uptick in international oil prices, according to the preliminary results of the 2021 Budget published by the Ministry of Finance (MoF) earlier this week. Gas revenue spiked a hefty 40 per cent on the back on higher global gas prices and an upturn in LNG exports.
Against estimated revenue of RO 3.550 billion from oil exports in the 2021 Budget (based on an assumed price of $45 a barrel), preliminary results now put the figure at RO 5.555 billion (based on an actual average price of $61/b). Likewise, gas revenue estimated at RO 1.870 billion last year has soared to RO 2.628 billion in the preliminary results.
The resulting effect in bringing down the annual deficit was significant. “The preliminary results of 2021 Budget show an increase in total revenue that led to a lower deficit than what was estimated in the 2021 Budget. The total revenue is projected to reach RO 10.9 billion compared to the budgeted figure of RO 8.6 billion, up by 27 per cent. Public spending has increased to nearly RO 12.2 billion, up by 12 per cent compared to the 2021 Budget. Moreover, the deficit dropped by RO 1 billion i.e., 45 per cent, totalling RO 1.2 billion in 2021,” the Ministry noted.
However, non-oil revenue declined by 14 per cent due to persistent implications of the COVID-19 pandemic on the business activities, notwithstanding measures taken by the Government to stimulate the private sector. Boosted by strong hydrocarbon revenues, total revenues reached nearly RO 10.9 billion by the end of 2021, up by 27 per cent compared to the budgeted figures of RO 8.6 billion.
Public Spending
Public spending, per preliminary results, increased 12 per cent to about RO 12.2 billion as compared to the budgeted figure of RO 10.9 billion. “Such an increase is mainly due to the following: Increase of current expenditures of civil ministries and defence and security units by 2 per cent; Continued support of the Government to cover expenses of the oil and gas sector until EDO completed the required legal procedures and commenced funding its operations; and Increase in contributions and other expenses by 7 per cent as a result of settling water subsidy for previous years,” the Ministry said.
Importantly, a new budget-item was introduced within the 2021 Budget to repay future debt obligations. By the end of 2021, the total appropriations allocated for this budget item amounted to RO 150 million.
Development spending is anticipated to reach RO 1,100 million by the end of 2021, up by 22 per cent compared to the budgeted figure of RO 900 million estimated in the 2021 Budget. This is due to settlement of payments deferred from previous years, and expenses required to address the damages caused by Cyclone Shaheen.
Further, with a view to expedite the settlement of payments to private contracts, around RO 1.2 billion in payments were completed by the Ministry of Finance as of end-December 2021.
The total cost of expenses required for the COVID-19 pandemic amounted to RO 53 million. Such expenses included costs of vaccines and medicines.
Deficit and Financing
The 2021 Budget deficit declined to RO 1.2 billion, down by RO 1 billion i.e., 45 per cent less than the estimated deficit of RO 2.2 billion in the 2021 Budget. This is attributed to higher public revenue, the Ministry said.
“As per the anticipated deficit rate by the end of 2021, the MOF has reduced financing requirements versus estimated figures of 2021. Accordingly, the 2021 Budget deficit was financed through external and domestic borrowing by RO 823 million, as well as drawing on reserves by RO 400 million.”
