Hit hard by the coronavirus crisis and by lower oil prices, the oil-producing Gulf state has recently announced a fiscal reform plan that aims to bring its fiscal deficit down to 1.7% of gross domestic product by 2024, from a preliminary deficit of 15.8% this year.
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“The direction that Oman took recently … is a step in the right direction,” said Jihad Azour, director of the IMF’s Middle East and Central Asia Department.
“But I think there’s also room on the expenditure side to streamline and to reorganise the priorities in order to be ready to support the economic recovery, address some of the current issues that Oman is facing.”
Sultan Haitham, the country’s ruler, in mid-October said a 5% value-added tax would come into force in April 2021 as part of efforts to diversify government revenues.
Oman’s economy is expected to shrink by 10% this year, the biggest contraction in the Gulf, and its fiscal deficit could widen to 18.3% of GDP from 7.1% last year, the IMF has estimated.
“Also Oman has to address the level of debt that is very important too,” Azour said, speaking at a Euromoney conference.
Rated below investment grade by all the major credit ratings agencies, Oman’s $2 billion bond issuance last month disappointed, as demand was hit by worries about the country’s worsening credit trajectory and wider market jitters.
Reporting by Davide Barbuscia
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