IMF’s Technical Help in Oman Will Unlikely Result in Aid Package

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The International Monetary Fund’s technical assistance for Oman doesn’t come with conditions and isn’t going to lead to any financial assistance, its mission chief to the Gulf country said.

“The medium-term fiscal plan is not a plan with the IMF, it is the authorities’ own plan,” Daniel Kanda told Bloomberg in an interview late Wednesday. “It was pretty much completed by the time we got into the picture, it’s not something that was jointly developed.”

Struggling with the aftermath of lower oil prices and Covid-19, Oman has been seeking ways to tame its budget shortfall and diversify the economy as crude reserves dwindle. As part of an ambitious economic overhaul, it’s cut public spending, slashed government jobs and implemented a value-added tax. It also plans to introduce an income tax -- unheard of in the oil-exporting Gulf region -- which Kanda said would be implemented in the second half of 2022.

The IMF said this week that the sultanate had also asked for technical assistance to develop a program that would help it eliminate its budget deficit over the medium term by diversifying the economy and reducing the government’s reliance on hydrocarbons. The plan is aimed at reducing Oman’s reliance on international borrowing.

IMF’s Technical Help in Oman Will Unlikely Result in Aid Package

The government has sped up privatization of government-owned assets to help reduce its expenditures and budget gap. It’s reportedly looking at options for state energy company OQ SAOC, including a potential initial public offering.

Last year, Oman transferred the government’s oil and gas expenditures to Energy Development Oman, a newly established firm entitled to raise financing independently of the Energy Ministry.

That move, along with this year’s rebound in crude oil prices, are behind the government’s rapid fiscal turnaround; Oman’s budget deficit ballooned to over 19% of economic output last year as a double whammy of pandemic closures and low oil prices hit finances but is expected to narrow to 2.4% of gross domestic product this year.

Oman is expected to move into surplus next year, depending on the course of oil prices, according to Kanda. The economy is projected grow 2.5% this year, an upward revision from the 1.8% previously forecast, while non-oil growth, which the fund wants to help Oman accelerate, is set to reach 4% in 2026.

“Wherever possible, each company will be assessed on whether it properly belongs in the public sector or should be privatized,” Kanda said. “Many of these companies will ultimately find themselves partially or fully privatized.”

©2021 Bloomberg L.P.

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