MUSCAT: Oman is banking on oil prices staying high this year to fund heavy spending on job creation and social welfare, according to plans released yesterday.
Finance Minister Darwish Al Balushi told a news conference that Oman, whose revenues come mostly from oil and gas exports, would need an oil price of $104 per barrel in 2013 to balance its state budget.
This ‘break-even’ oil price has been rising since scattered street protests over economic conditions and political issues in 2011 prompted aggressive government spending to head off potential social discontent.
Balushi did not give last year’s break-even price, but economists polled by Reuters estimated it at around $83, up from $66 in 2011. Brent crude oil was trading at $112 in global markets yesterday.
“Last year we created 36,000 jobs for Omanis by spending OR300m ($780m),” Balushi said. “This year we will create 56,000 jobs, of which 20,000 will be in the government sector.”
The International Monetary Fund estimates that unemployment among Omani citizens may have exceeded 20 percent in 2010. Government officials say that estimate is far too high and that the number of registered unemployed was reduced by three-quarters to about 17,000 last year, in a population of roughly 2 million Omani citizens.
Strong economic growth is key to keeping down unemployment, and the 2013 budget plans indicate the government will keep spending high in many areas despite the growing risk of running a deficit if oil prices fall.
Oman envisages total state spending of OR12.9bn in 2013, up nearly 30 percent from its 2012 plan. Spending on investment, including ports, roads and facilities to produce oil and gas, is earmarked to climb 14 percent to OR3.1bn.
Actual state expenditure last year was about OR13bn. The government was able to overspend its budget by a large margin and still post a budget surplus of about OR1bn in 2012 because oil prices were high, averaging $109 per barrel instead of the $75 for which the country planned.
AFP
