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Oman will resort to overseas borrowing as cover for its budget deficit in 2014.

Financial Affairs Minister, Darwish al-Balushi of the Arabian Peninsula, Sultanate of Oman, confirmed in January that the

government expects to partially address a projected budget deficit looming in 2014 with foreign borrowing.

Oman had earlier published a budget plan for 2014, which ran expenditure levels at 13.5 billion Omani Riyals

(US$ 35.06 billion) against an income of 11.7 billion Omani Riyals (US$ 30.38 billion), based on an average crude oil

price of US$ 85 a barrel. The combined result of which, is a bottom line deficit of 1.8 billion Omani Riyals

(US$ 4.67 billion). These figures represent an increase in spending of 5 per cent and also reflect a modest increase in

revenue of 4.5 per cent.

Not all of this amounts to negative news however, with a range of new infrastructure projects to be injected into the economy

over the coming year, which will create both domestic business opportunities and jobs. Plus the oil price was also above

US$ 105 per barrel and rising steadily this month, making the budget basis price very conservative. Meanwhile the

sultanate's budget surplus for the first ten months of 2013 continued to mount up at 543.9 million Omani Riyals

(US$1.41billion), despite a marginal drop in the international oil market price.

Balushi addressing a budget news conference said that the government intended to borrow 400 million Omani Riyals

(US$ 1.04 billion) this year, of which half would be secured from overseas sources, a collective of commercial banks and

"strategic partners" such as insurance companies, to help fund the deficit.

No mention was made by the financial affairs minister of an earlier initiative disclosed by officials, which had implied that

Oman might issue an international bond this year, its first since 1997. However, he was prepared report that the government

was essentially committed to secure part of its domestic borrowing in 2014, via its first issue of Islamic bonds known in the

region as sukuk.

Oman has been reticent in comparison with its Arabian Gulf neighbours, as far as integrating Islamic finance into its banking

sector architecture, but is now actively working to develop that financial services industry segment. Maybe this is the ideal

opportunity to truly get the Islamic finance segment off the ground as part of an industry.

In terms of the energy sector, on which Oman relies to a great extent, China remained the single largest importer of Omani

crude at 79.61 per cent , followed by Japan, Taiwan, Thailand, Singapore, India and South Korea. In the period from

January to October 2013 net oil revenue increased by 2.2 per cent over the previous year from 8.71 to 8.91 billion Omani

Riyals (US$ 22.62 to 23.14 billion) courtesy of a 2.8 per cent expansion in crude oil production volumes, in turn

counterbalanced by a 3.7 per cent decline in oil prices.

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Publication:Andy McTiernan Property & Economy Bulletin
Geographic Code:7OMAN
Date:Jan 7, 2014
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