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OMAN OUTLOOK

2015

GOVERNMENT REVENUES
OMR / million

2013actual

% of
Revenue

2014actual(10M)

% of
Revenue

GOVERNMENT REVENUE
Net Oil Revenues
Gas Revenues
Other Current Revenues
Capital Revenues
Capital Repayments
TOTAL

10,430
1,495
1,931
30
22
13,908

75%
11%
14%
0%
0%

8,643
1,166
1,692
0
0

75%
10%
15%
0%
0%

11,502

85% of
Government
Revenues are
hydro-carbon
based.

ie: oil price

dependant

Oman produces ~340 million barrels of oil, per annum. ~88% of which is exported.
(estimates of AMD as on Dec.14)

$1 (USD) price movement in the price of a barrel of oil, impacts Omans annual revenue by
~OMR 100 million.

$60 (USD) price for a barrel of oil, impacts Omans annual revenue negatively by
~OMR 4 billion. (relative to 2014 revenue levels)

Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

GOVERNMENT REVENUES
OMR / million
OTHER REVENUES
Taxes and Fees
Income Tax (Corporate)
Technical/Training Projects
Licence Fees & Others
Communication services licenses
Custom Duties

Non-tax/fee revenues
Water Revenues
Postal Revenues
Airport Revenues
Port Revenues
Public Communication Services Toll
Surplus from Public Authorities
Rent from Government Real Estate
Income from Government Investments
Interest on Bank Deposits and Lending
Others

2013actual

% of Other
Revenues

1,931

% of Total
Revenues

Other revenues constitute

Government revenues.

14%

of

Total

14%

943

49%

7%

395
155
177

20%

3%

8%

1%

9%

1%

217

11%

2%

51%

7%

3%

0%

0%

0%

2%

0%

0%

0%

5%

1%

1%

0%

1%

0%

29%

4%

1%

0%

10%

1%

988
63
0
34
0
88
10
12
556
28
196

Corporate taxable profits of OMR 3.6 billion per

annum along with Custom duties, Telecom,
Port and Airport revenues are all susceptible to
oil price risk given the overall economic
dependency to hydro-carbon revenues.

Investment income along with Corporate

income tax are the two main constituents
accounting for almost 50% of other revenues
and rakes in ~OMR 1 billion in absolute terms.
The proposals of revenue enhancement by
Majlis al Shura primarily centres in this
segment of Government revenues.
OMR 240 million of enhancement is expected
to materialise, as the expectation is for the
following to be adopted:
Fair tax on LNG exports OMR 196
million
Revision in telecom royalty OMR 31
million
10% levy on extracted mineral sales
OMR 13 million

Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

GOVERNMENT EXPENDITURE
2013actual

OMR / million

% of
Expenditure

2014actual(10M)

% of
Expenditure

GOVERNMENT EXPENDITURE
Current Expenses

8,822

63%

6,416

Defence & National Security

Civil Ministries
Oil Production Expenditures
Gas Production Expenditures
Interest Paid on Loans

4,494
3,849
344
82
54

32%
28%
2%
1%
0%

2,736
3,274
306
66
34

Investment

3,120

22%

2,455

Civil Ministries (Development)

Civil Ministries (Capital)
Oil Production
Gas Production

1,744
61
753
562

12%
0%
5%
4%

1,419
604
432

12%
0%
5%
4%

Participation & Others Expenses

2,048

15%

1,341

12%

0%

1,300

11%

Un-apportioned Expenses
TOTAL

13,990

11,512

24%
28%
3%
1%
0%

The proposals for expense

rationalisation by Majlis al
Shura,
centres
around
reducing Defence spend
and Oil & Gas production
expenditures.

The current expenditure

schedules are synonymous
with the expansionary
policies of State.

If expense rationalisation were to be an option to be pursued by the state to counter falling

revenues, a prudent estimate of quantum will range between OMR 1.2 1.8 billion (10% decline
relative to current levels)
Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

GOVERNMENT EXPENDITURE
OMR / million
Civil Ministries (Current expenses)
Salaries, Wages, Allowances & Others
Salaries & Wages
Allowances
Other remuneration
Contribution to Pension Fund

2013actual
3,849
2,472
1,103
943
214
212

Goods & Services

% of Current
Expenses

% of Govt.
Expenditure

44%

28%

28%

18%

13%
11%
2%
2%

814
212
506
96

9%

Purchase of Goods
Purchase of Services
Government Services

Subsidies & Transfers

562

6%

2014 Budget
2014-10M actual

6%

11%
26%

18% of Revenues which are

allocated
towards
Salaries,
Wages, Allowances & Others is
expected to increase by 3-5% for
2015.

5%

4,487
3,274

4%
OMR / million

% of Govt.
Expenditure

Government Participation and Other Expenses

Domestic, Regional and International Interests

Subsidies and support specifically targeting

utilities and energy segments can be expected
to be moderated.

2013actual

Subsidy (Soft Loans) - Private Sector & Housing

Support to Electricity Sector
Support to Basic Goods
Operational support
Support to Petroleum Products

452
31
321
28
99
1,119

TOTAL

2,048

2014 Budget
2014-10M actual

1,608
1,341

3%
0%
2%
0%
1%
8%

15%

Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

2015 GOVERNMENT FISCAL PROJECTIONS

ASSUMPTIONS:
Gas revenues, to decline by 20% from 2014 values and remain at past average of 10% of total revenues
Other revenues, to decline by 5% from 2014 values and remain at past average of 15% of total revenues

ANNUAL (2015) AVERAGE OIL PRICE THRESHOLDS

$ 40

$ 60

$ 80

$ 100

GOVERNMENT REVENUE
(OMR / Billions)

7.4

9.4

11.4

13.8

ASSUMPTION:
Government Expenditure (2015) is assumed at 2014 projected levels (ie: no increment from current level)

OMR 13.8 billion

FISCAL SURPLUS / (DEFECIT)
(OMR / Billions)

- 6.4

- 4.4

- 2.4

break even
6

DEFECIT FINANCING AVENUES

AVENUE - I

Surplus brought from previous year:

2015 can expect to have a brought forward surplus of ~OMR 1 billion
from 2014.

AVENUE - II

Development Bonds (GDB):

Current outstanding GDB stock amounts to OMR 561 million. (Oct.14)

Cumulative Government Debt (including GDB, Loans and other liabilities) amounts to ~ OMR 2.5 billion.
(Dec.14)

Debt / GDP = 8.1%

(GDP forecasted at OMR 31 billion, IME 2014 estimates)

GDB Investor Profile

Banks

70.0%

Financial Institutions

5.0%

Pension Funds

24.5%

Debt Service Ratio = 3.9%

Government entities

0.3%

(Computed based on cumulative debt servicing charge / 2014

estimated total government revenue)

Individuals

0.2%

Interest Payment ~ OMR 50 million

(Annual interest charge, estimated for 2014)

continued

DEFECIT FINANCING AVENUES

AVENUE - II

Development Bonds (GDB):

For each OMR 100 million tranche of new GDB issuance; the impact on the state finances will be as
follows: (assuming weighted average tenor of 5 years, at 3.5% p.a. / GDP threshold at OMR 31 billion)
Debt / GDP : will rise by 0.3% (ie: 3% for OMR 1 billion)
Interest Payment: charge will increase by OMR 3.5 million, per annum (OMR 35 million for
additional borrowing of OMR 1 billion)
INVESTOR POOL
Pension & Social Security Funds of Oman; rake in close to OMR 400 million per annum as
contribution. (AMD 2014 estimates)
Cumulative Banks Balance Sheet:
ASSETS

CASH / CBO
DEPOSIT

DUE FROM
BANKS

CREDIT

SECURITIES

FIXED
ASSETS

OTHER
ASSETS

TOTAL
ASSETS

LENDING
RATIO

1,894.4

2,125.0

16,588.0

2,995.1

190.7

659.5

24,452.7

77.3%

DUE TO
BANKS

DEPOSITS

CAPITAL /
RESERVES

PROVISIONS

OTHER
LIABILITIES

1,517.8

17,148.6

2,892.6

593.0

2,300.7

CBO
LIABILITIES BORROWING

0.0

TOTAL
LIABILITIES

24,452.7

CAR

16.5%

Central Bank of Oman, foreign reserves are estimated to be ~ OMR 6.5 billion
Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

DEFECIT FINANCING AVENUES

AVENUE - III

Drawing from reserves:

Omans strategic reserves are estimated average ~ OMR 25 billion.

AVENUE - IV

Government Loans:

Bilateral loans from entities such as IDB, ADB and regional states are an option.

AVENUE - V

Government Grants:

Regional governments (specifically) are known to bestow grants in times of need, for neighbourly
states.

OUTLOOK 2015
In an environment where the Government is financing deficit budgets and trying to maintain status
quo on a broad expansionary fiscal policy; the Banking system will be called upon along with key
strategic institutions such as the Reserve Funds and Pension Funds to act as linchpins.
The Banking sector trends to emerge will be the bell weather for the broader economic activity.
Sectoral break-up of commercial bank credit
Construction
Services
Manufacturing
Transport and Communication
Electricity, gas and water
Import Trade
Financial Institutions
Wholesale & Retail Trade
Mining and Quarrying
All Others
Non-Resident lending
Export Trade
Agriculture and allied activities
Government
Personal Loans

9.8%
8.5%
8.1%
6.6%
5.1%
4.5%
4.4%
4.1%
3.9%
3.0%
1.1%
0.4%
0.3%
0.1%
40.1%
100.0%

The exact impact on other sectors of

the economy will be elaborated post
budget (details) release, scheduled for
5th Jan 2015.
Source: CBO Annual Report 2013, CBO Publications, ahlibank AMD

Government spending initiatives will ultimately

determine the credit expansion within the broader
economy.
The expectation is for credit expansion to near high
single digit.
Lending rates can be expected to inch higher, whilst
deposit rates may lag pace, relative to the former.
The above can be expected to enhance NIMs and also fee
revenues of the Banks.
Preliminary view is for the economy to be able pullthrough with the existing development initiatives given
the ability to finance budget for 2015.
We also view the current levels of oil price as unsustainable. Thus, we expect prices to reverse to
equilibrium ($80) over the course of 2015.

10