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New Faces at Oman’s Central Bank, Ministries as Deficit Swells

New Faces at Oman’s Central Bank, Ministries as Deficit Swells

Oman replaced its finance minister and central bank chairman, consolidating ministries as it’s headed for one of the biggest budget deficits in the Gulf.

Sultan Al Habsi takes over the Finance Ministry, replacing Darwish Al Balushi, while Taimur Bin As’ad becomes the head of the central bank board. Among other changes, Badr bin Hamad bin Hamood Al Busaidi was named foreign minister, replacing veteran Yousef Bin Alawi who had positioned himself as a regional peace-broker.

New Faces at Oman’s Central Bank, Ministries as Deficit Swells

In a burst of more than two dozen decrees, Sultan Haitham bin Tariq scrapped some ministries and merged others, according to state TV. More entities were brought under the control of a renamed Ministry of Energy and Minerals.

The International Monetary Fund expects Oman’s budget shortfall to reach 16.9% of gross domestic product this year, hit by the coronavirus pandemic and declines in oil prices. Both Moody’s Investors Service and Fitch Ratings have downgraded the country’s sovereign ranking twice this year, citing financial challenges.

Iran Policy

Unlike his predecessor Sultan Qaboos, who was heavily involved in most decision-making, the new leader has signaled he wants to pursue a more inclusive government, appointing members of the royal family to senior posts and tapping the country’s pool of officials.

New Faces at Oman’s Central Bank, Ministries as Deficit Swells

“Restructuring of the government has been on the books for a long time,” said Samir Radwan, a former economic adviser to Oman’s Supreme Council for Planning. Ministries’ overlapping responsibilities had created tensions, he said.

Oman requires “a number of urgent fiscal measures, especially on the current expenditure side, which accounts for more than 80% of total spending,” said Mohamed Abu Basha, head of macroeconomic research at Cairo-based EFG Hermes. The steps could target “non-wage savings on the current expenditure side since cutting wages would be a very tough decision for the government to take.”

The exit of Bin Alawi after 23 years at the helm of foreign policy will be noted outside the country. Oman has often struck a more conciliatory position toward Iran than many of its neighbors, and was one of only two countries that refused to take sides in the dispute that pits Saudi Arabia, the United Arab Emirates and Bahrain against Qatar.

Analysts predicted there would be little change. “Oman’s foreign policy is quite institutionalized,” said Sanam Vakil, deputy head and senior research fellow of the Middle East and North Africa Program at Chatham House. “I don’t think there is going to be a huge or dramatic shift under the new foreign minister” away from its neutral stance, she said.

©2020 Bloomberg L.P.