2024-06-04-IMF-Mitigating_Fiscal_Risks_in_Oman_16页_1mb

Mitigating Fiscal Risks in Oman

Oman's fiscal risks are multifaceted and pose significant challenges to its fiscal position due to heavy reliance on hydrocarbons. The country is exposed to risks from oil price volatility, state-owned enterprises (SOEs), global financial conditions, public-private partnerships (PPPs), and climate-related events.

Key Fiscal Risks

• Oil Price Volatility: This is the primary fiscal risk, with historical oil declines causing large deficits and increased public debt. Mitigation includes expenditure rationalization and buffer accumulation.
• SOE Liabilities: SOEs account for substantial debt, concentrated in few entities. The Oman Investment Authority's Rawabet program is reducing debt and enhancing governance.
• Global Financial Conditions: Tightening financial conditions may increase borrowing costs, but refinancing risks are limited by debt management.
• Other Risks: PPPs are underdeveloped; climate events like cyclones cause moderate fiscal costs.

Mitigation Measures and Actions

• Fiscal Adjustments: Introduction of taxes like excises and VAT to boost revenue, with plans for tax reforms and subsidy reductions.
• Medium-Term Framework: Adoption of a legally binding framework to set expenditure ceilings and enhance fiscal discipline.
• Buffer Building: Accumulating fiscal buffers through transfers to the Petroleum Reserve Fund and saving with banks and the OIA.
• SOE Reforms: Deleveraging and divestment strategies to empower the private sector.
• Climate Preparedness: Establishment of a National Fund for Emergencies to address natural disasters.
• Policy Coordination: Creation of mechanisms like the National Committee for cross-government risk management.

Recommendations

• Strengthen fiscal reforms, including revenue mobilization and debt reduction.
• Enhance transparency and reporting of fiscal risks through comprehensive statements.
• Expand data coverage for better risk identification and management.
• Balance risk mitigation with fiscal sustainability, prioritizing phased subsidy removal and strategic use of windfall revenues.

This analysis underscores the need for continued reforms to ensure fiscal sustainability in Oman.