What modifications did you have to implement in the National Program for Fiscal Balance (Tawazun) as a result of the pandemic?
A Medium-Term Fiscal Plan (MTFP) for 2020-2024 was developed with an overarching objective of achieving fiscal balance in the medium term. The COVID-19 pandemic had a direct impact on achieving the objectives of the plan, and several modifications and adjustments have been made. These include reviewing the GDP to reflect lower growth rates, as well as lower revenues from oil and gas as a result of lower production and lower oil price. Moreover, non-oil revenues were also reviewed to reflect lower household and economic activities. Therefore, the timing and duration of implementing some of the policies were adjusted to counter the impact of COVID-19 on the Sultanate. However, the government remains committed to achieving its target of realizing a fiscal balance in the medium term.
How will the program contribute to implementing Oman Vision 2040?
The Sultanate's fiscal sustainability is the foundation of Oman Vision 2040 and the cornerstone for the implementation of Vision 2040. Through fiscal sustainability, the government aims to improve its ability to withstand financial shocks and ensure financial efficiency, as well as absorb any economic or social challenges that may arise and ensure the ability to fund the vision's development plans through private sector investment and FDI. The vision's objectives are articulated in 12 national priorities, of which, four have particularly shaped the Sultanate's medium-term fiscal plan. These include: economic diversification and fiscal sustainability by supporting economic growth; the private sector and global investment value chain by improving the business environment and stimulating domestic and foreign investments; governance of the state's administrative bodies, resources, and projects by diversifying and enhancing government revenues and rationalizing government expenditures; and social protection and well-being by implementing a social safety net.
What is your vision for Oman's deficit, credit rating, and indebtedness two years from now, and what measures are you taking in that direction?
The MTFP has been developed with the objective of reducing the overall fiscal deficits as a percentage of GDP to sustainable levels (below 3%) over the medium term. The plan includes several measures that will help to improve the Sultanate's fiscal position, thus reducing the central government debt and enhancing the Sultanate's credit metrics. These actions include diversifying and enhancing public revenues, rationalizing and controlling government expenditures, and driving efficiency, as well as strengthening public financial management. Since the implementation of the MTFP, Oman's credit narrative has improved sharply. The affirmation of the Sultanate's current ratings by all agencies during the year is recognition that the government has taken important first steps in its medium-term fiscal consolidation strategy. We expect the momentum to continue as the government implements a sustainable fiscal framework that will be more resilient to commodity cycles and begin to put the debt path on a steady downward trajectory.
How will the fiscal policies of the program affect the development of the market?
While implementing fiscal consolidation measures, the government is focused on improving the business environment and stimulating investments to support economic growth over the short to medium term. The government acknowledges that the implementation of fiscal consolidation measures will impact consumption and economic activities, as historically the government has been one of the main drivers of economic growth. In parallel to counteracting the decline in civil ministries' capital expenditure, the government is collaborating with the private sector through PPPs on key strategic projects. By implementing the MTFP and reducing debt, this will lend greater confidence to both international and domestic investors, therefore attracting private-sector participation and investment into the economy in line with Vision 2040.