Oman’s Fiscal Renaissance, A Testament to Economic Resilience and Strategic Reforms
In a testament to visionary leadership and strategic fiscal reforms, Oman has undergone a remarkable fiscal turnaround under the guidance of His Majesty Sultan Haitham bin Tarik. Despite facing global economic challenges, the sultanate has demonstrated resilience and achieved significant milestones in both economic and social sectors over the past three years.
The government’s commitment to prudent fiscal management, cost control, and the diversification of revenue sources has yielded positive results. The fiscal performance during the initial three years of the 10th Five-Year Development Plan (2021-2025) has exceeded expectations, showcasing Oman’s ability to navigate and overcome economic headwinds.
The fiscal journey began with the reduction of the deficit to approximately RO1.223bn in 2021, followed by a noteworthy fiscal surplus of about RO1.146bn in 2022, surpassing the targets outlined in the development plan. The preliminary results of the 2023 budget reveal a substantial surplus of approximately RO931mn, a stark contrast to the initially projected deficit of RO1.3bn, reflecting the effective implementation of fiscal policies.
One of the key achievements contributing to Oman’s fiscal success is the substantial reduction in public debt. The government’s commitment to the Liability Management Exercise and Public Debt Reduction initiatives has resulted in a notable decrease in public debt from RO17.6bn in 2022 to RO15.2bn at the end of 2023. The public debt ratio, calculated as a percentage of GDP, has seen a significant decline to 35% in 2023, down from nearly 70% in 2020, showcasing prudent financial management.
This reduction in public debt has not only enhanced Oman’s credit ratings but also mitigated the impact of rising global interest rates on the government’s loan repayments. All three major global credit rating agencies, Moody’s, S&P Global Ratings, and Fitch Ratings, have upgraded Oman’s sovereign credit ratings during 2022 and 2023.
Moody’s upgraded Oman’s credit rating from Ba2 to Ba1 in December 2023, citing the effective implementation of fiscal policies and a commitment to debt reduction. S&P Global Ratings, in September 2023, upgraded Oman’s credit rating from BB to BB+ with a stable outlook, acknowledging the potential for further improvement if the government continues its efforts to reduce public debt and enhance non-oil revenue.
Fitch Ratings also joined the chorus of positive assessments, upgrading Oman’s credit rating from BB to BB+ in September 2023. The agency commended Oman’s steadfast commitment to fiscal consolidation measures and highlighted the potential for further credit rating improvements if external public debt continues to decrease.
The fiscal surplus achieved in 2022 and 2023 has not only allowed for increased social spending but has also facilitated initiatives to stimulate economic growth. The allocated budget for projects outlined in the 10th Five-Year Development Plan increased from RO5bn to over RO8bn by the end of 2023, with a focus on socially impactful projects in education, healthcare, and social housing.
As Oman continues its journey of economic transformation and resilience, the prudent fiscal measures and credit rating upgrades stand as a testament to the effectiveness of strategic reforms and the nation’s commitment to sustainable development. The sultanate’s fiscal renaissance sets a positive trajectory for the coming years, emphasizing the importance of adaptive policies and visionary leadership in navigating complex global economic landscapes.