Oman is making great progress in financial adjustment and structural improvements that will help reduce the impact of the COVID-19 pandemic on the economy, the Institute of International Finance (IIF) said on Wednesday.
IIF said in a new report that the Sultanate has shown a strong financial response to maintain the resilience of the economy during the current crisis.
The report pointed out that Oman had begun a set of financial measures to deal with the repercussions of the coronavirus pandemic, as many ministries were reorganised or merged, with the aim of reducing spending. Other new measures include spending cuts.
The government also intends to introduce a value-added tax (VAT) and 5 per cent income tax in early 2021, which could generate about 2 per cent of gross domestic product (GDP) in additional non-hydrocarbon revenue.
“The Omani government spending as a share of GDP is 43 per cent – much higher than most developing and emerging economies. Oman still has ample scope to scale back spending and raise the efficiency of public investment,” said Garbis Iradian, Chief Economist, MENA of the IIF.
The fiscal deficit will shrink significantly after 2020, supported by spending cuts and tax reforms, he further added.
IIF confirmed that the Omani economy is in a much better condition than the recent IMF projections, pointing out that its forecasts show more positive economic conditions with a fiscal deficit much less than the one projected by IMF.
The IIF attributes that to the Sultanate’s expected average crude oil export prices for this year is to be $4 per barrel higher than IMF forecast; hydrocarbon production is likely to decline by only 2 per cent in 2020.