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Govt to Spend Lavishly on Growth and Jobs This Year


Middle East : 04 January 2013

Source: Times of Oman 2013

Muscat: The government will create 56,000 jobs this year and the private sector will receive a boost with a generous subsidy to help its growth, Darwish Ismail Al Balushi, Minister Responsible for Financial Affairs, said yesterday at a press conference on the 2013 budget.”The government will employ 20,000 job seekers and create 36,000 jobs in the private sector this year. Last year, the government spent RO300 millions to create a total of 36,000 jobs for Omanis,” the finance minister told reporters while unveiling the 2013 budget. As previously reported, the budget plan envisages spending of RO12.9 billion in 2013, up nearly 30 per cent from the 2012 plan.

Last year’s actual spending was about RO13 billion, because of outlays on development projects. In the 2012 budget, revenues were estimated at RO8.8 billion, based on an average price for Oman’s oil of $75 per barrel. “We have achieved an average oil price of $109 per barrel last year to give us actual revenues of RO14 billion. We also wiped out the deficit and recorded a surplus of RO1 billion in 2012. The government has transferred the surplus fund to the reserve and it would be used for this year if needed,” Al Balushi added. The 2013 budget envisages a deficit of roughly RO1.7 billion, based on an average oil price of $85. Al Balushi also said Oman’s break-even oil price, the level it would need to balance its budget, would be $104 this year.

“Because we have increased spending this year and having in mind a bigger deficit than last and possibly increasing spending later during the year, we may need to sell our oil at $104 per barrel on average to break even,’ the minister explained. Al Balushi said that heavy government spending had succeeding in boosting economic growth. Oman’s gross domestic product (GDP), adjusted for inflation, grew an estimated 8.3 per cent last year, faster than the government’s target of 7 per cent, he said. “We have increased spending 35 per cent for the current five year plan (2011-2015) to RO58 billion from the original figure of RO43 billion due to development projects such as roads, ports, airports, tourism, education and health,” Al Balushi said.

But keeping economic growth high is the key to keeping down unemployment, and the 2013 budget plans indicate that the government will keep expenditures high in many areas despite the risk of running a deficit if oil prices fall. Spending on investment, including ports, roads and facilities to produce oil and gas, is set to climb 14 per cent to RO3.1 billion this year. In addition, the budget envisages the government borrowing RO200 million domestically and RO150 million from banks outside the country. In 2011, fellow GCC countries pledged $10 billion in aid to Oman over 10 years to help it develop its infrastructure and create jobs after a wave of protests engulfed the Sultanate.

The funds have been slow to arrive, but the budget statement said the government would count on them to help finance infrastructure projects such as railways, roads, electricity and water facilities. Al Balushi said that government subsidy to business will be RO1.335 billion this year. The main beneficiaries will be tax exemptions to traders, subsidies in domestic gas, vehicle petrol, and water and electricity sectors. “We will continue to give our financial support in the way of subsidy to farmers, fishermen and business people to create a healthy trading atmosphere for them to help them compete. Housing loans will continue to be subsidised and free housing for low income citizens will be distributed as we have done in the past. It is part of our goal to raise the living standards of the Omani people,” Al Balushi revealed.

The government will also continue to support the Small to Medium Enterprises (SMEs) by funding their businesses. “Small to medium traders are important to any county and we will extend our support this year. SME projects will help cut down on job seeking since this category of business creates self-employment and if nurtured properly, opens up employment opportunities for other Omanis,” the minister noted.The performance of the National economy during 2012 was positive at all levels and by all standards, Darwish Ismail Al Balushi, Minister Responsible for Financial Affairs, said at a press meet in Muscat. He said that the government expenditure had a direct impact on the economic recovery, rising levels of the consumption sector and export and import activities.

“As a result of rising activity, it is expected that the economy will grow at a rate of 8.3 per cent compared with the targeted growth rate of 7 per cent while the non-oil domestic product will grow at the rate of 10.6 per cent.

“All this is coupled with growth in domestic savings by 4 per cent. The volume of deposits increased to about RO14 billion while the credit facilities rose by 17 per cent,” he said.

The minister said the performance of the companies listed at the Muscat Securities Market witnessed a remarkable improvement, where the operational profits increased by 18 per cent which resulted in 2 per cent rise in its index.

“By virtue of the higher proceeds of oil and non-oil exports, the national economy is expected to achieve surplus in its external balances. The surplus ratio of the balance of trade to the Gross National Product GDP at the current prices in 2012 and 2013 is projected to amount to about 33.8 per cent and 33.2 per cent respectively, compared with 35.2 per cent in 2011. The surplus rate of the current balance is expected to decline from 14.1 per cent in 2011 to 10.7 per cent in 2012 and to about 8 per cent in 2013,” he said.

Al Balushi added: “As regards to Muscat Securities Market, it is expected that the market will improve this year as a result of continued government spending at the higher level and the issuance of much-anticipated Islamic financial instruments which will give the market a substantial depth and additional financial instruments will enhance the confidence of investors.”

Sale of government shares

The minister said that the government is considering the sale of some government shares in wholly or partially government-owned companies through MSM. He stressed that despite the accelerating pace witnessed by trade and economic activities, the inflation rate remained within the targeted limits at about 3 per cent by virtue of the decline in prices of basic goods and procedures adopted by the government for following and monitoring the trends of prices.

Total public revenues

About the performance of the general budget for the financial year 2012, he said, “Total public revenues are estimated to be RO8.8 billion on the basis of oil prices at US$ 75 per barrel while the public expenditure would be about RO10 billion with a deficit of RO1.2 billion. However, the actual expenditure increased to about RO13 billion as a result of the additional financial approbations allocated during the year for covering the different items of expenditure. However, by virtue of achieving a good oil price of US$109, the actual revenues increased to a higher level to amount to about RO14 billion. In light of this, a surplus of about RO1 billion is projected to be achieved, which will be directed to covering a part of the budget for 2013 amounting to RO1.7 billion.”

Shedding light on the objectives of general budget, Al Balushi said, “The State General Budget (SGB) endeavours to achieve a set of objectives for providing the requirements of development in harmony with the overall objectives approved in the Eighth Five-Year Plan 2011-2015 and its financial framework.”

Stimulating growth

He said the most important objectives are as follows: Stimulating the economic growth by increasing the government expenditure, especially the development spending, providing the financial allocations necessary for new employment in different units of the state’s administrative apparatus and the government companies and establishments, increasing the spending on education, training, health, housing and social insurance and preserving the current admission rates of the general diploma holders in the higher educational institutions.

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