This adjustment reflects significant improvements in Oman's fiscal health, including a reduction in government and state-owned enterprise debt relative to GDP, and a decrease in net external debt. The accumulation of sovereign foreign assets further underscores the nation's enhanced fiscal prudence.
A key indicator of fiscal reform success is the reduction of the fiscal break-even oil price to below $70 per barrel. This achievement highlights Oman's strengthened ability to manage public finances effectively.
Projections indicate that Oman's budget surplus will narrow to 0.7% of GDP in 2025, with a minor deficit of 0.2% anticipated in 2026. These forecasts are based on Brent oil prices averaging $70 per barrel in 2025 and $65 in 2026.
Reforms aimed at moderating spending and enhancing tax collection, such as the introduction of VAT and progress toward implementing personal income tax, are steps toward diversifying revenue streams beyond oil. Additionally, adjustments to social safety nets and subsidy reforms reflect a balanced approach to supporting vulnerable populations while controlling fiscal expenditures.
Government debt is projected to decrease to 34% of GDP by the end of 2024, with a further decline to 33.3% by 2026. The reduction of external debt by $2.8 billion in 2024 underscores this positive trend. Efforts to increase reliance on domestic debt, supported by a growing local market, further bolster fiscal resilience.
Oman's external balance sheet has strengthened, with government and SOE debt repayments mitigating liquidity risks. The country has transitioned from being a net external debtor in 2020 (-9% of GDP) to a net foreign asset holder (10% of GDP in 2024). These improvements are projected to stabilize net external debt levels at 13% of GDP over the next two years.
The non-oil economy is expected to grow at rates exceeding 3% annually in 2025 and 2026, driven by domestic consumption, foreign investment, and tourism. These sectors play a critical role in reducing the government's dependency on hydrocarbon revenues and fostering long-term economic sustainability.