His Majesty Sultan Qaboos bin Said issues decree endorsing state budget

Total expenditure estimated at RO. (5800) million, revenues at RO. (5400) million

National economy minister says budget reflects government commitment to build competitive economy

His Majesty Sultan Qaboos bin Said has issued a Royal Decree No. 1/2008 endorsing the state General Budget for the fiscal year 2008.

Article one: Endorses the general state budget for the fiscal year 2008 as per the annexed tables.

Article two: All ministries and government units should enforce the provisions of the Royal decree each within its scope of discretion.

Article three: The decree takes effect from January 1, 2008.

Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council announced that State’s general revenues for the year 2008 were estimated by about RO. (5400) million as against RO. (4490) million in the budget of the fiscal year 2007 i.e. an increase by RO. (910) million or (20%).

Oil and gas revenues constitute (78%) of the total revenues whereas the current and capital revenues constitute (22%) thereof, he added.

During the press conference that was held today at the Ministry of Finance to unveil the state general budget for 2008, Macki pointed out that oil revenues were estimated on the assumption of an average oil price of US$ (45) per barrel and oil production of 790,000 barrels per day. According to these assumptions, the oil revenues are estimated to amount to about RO. (3610) million i.e. (67%) of the state’s total revenues.

Macki pointed out that the contribution of the gas revenues in the amount of RO. (620) million shall constitute (11%) thereof. The current and capital revenues were estimated to reach about RO. (1170) million i.e. an increase by (26%) over 2007 budget or (22%) of the total revenues.

As for the gross expenditure for 2008, the total expenditure during the fiscal year 2008 was estimated at about RO. (5800) million as against RO. (4890) million in the fiscal year 2007 i.e. an increase by RO. (910) million or (19%). This total expenditure shall cover the following elements and constituents of expenditure: - The current expenditures of the government civil ministries and units were estimated at about RO. (1925) million i.e. with an increase by RO. (305) million, which represents (19%) over the estimates of the previous year 2007. The current expenditures represent (33%) of the total general expenditures. These appropriations include coverage of the basic government services, the operational expenses of the government ministries and units, expansion of the educational and health services, expenses of operating the new projects and the cost of promoting civil service employees with seniority since 2002.

Macki pointed out that the share of the health and the educational sectors amounted to (49%) of the total current expenditures. The current appropriations for the education and health sectors amounted to RO. (710) million representing (37%) of the total current expenditures of the civil ministries i.e. an increase by RO. (101) million or (17%) over the approved budget for the year 2007. These appropriations are apart from the approbations allocated for this sector in the development budget in the amount of RO. (63) million, he added.

The share of the health sector amounted to RO. (228) million, which represents (12%) of the total current expenditures of the civil ministries, i.e. an increase by RO. (29) million or (15%) over the 2007 approved budget, he added.

An amount of RO. (30) million was allocated to cover the total of 48499 cases under the umbrella of the social security system, he continued.

Estimates for the expenses of the production of oil and gas amounted to RO. (1350) million, which represent (23%) of the total general expenditure or an increase by (12%) over the approved budget for the year 2007, he continued.

Allocations estimated under the development budget amounted to RO. (725) million. This includes an increase by (45%) over the 2007 approved budget. These allocations cover spending on the continuing, as well as, the new development projects listed in the 7th five-year Plan (2006-2010) in the different sectors, he added.

Estimates of subsidy to the electricity sector amount to RO. (118) million to cover subsidy allocated to the electricity sector against purchasing power from companies producing electricity. This subsidy constitutes the difference between the cost of purchasing power and the anticipated returns from electricity sales. This, in addition to the subsidy to the water sector in the amount of RO. (61) million to cover the value of the water purchase from Al Ghubra, Barka, Sur plants and others, he furthered.

Estimates of the budget allocated for participations amounted to about RO. (249) million, of which an amount of RO. (236) million will be used for financing projects implemented by Oman Wastewater Company, Salalah Sanitary Drainage Services Company, Oman Oil Company, Oman Tourism Development Company, Majis Industrial Services Company and Salalah Free Zone Company, he continued.

In the light of the revenues and expenditures estimates included in the general budget, the estimated deficit for the year 2008, based on the oil price of US$ (45), amounts to RO. (400) million, i.e. (7%) of the revenues and (3%) of the Gross Domestic Product (GDP), similar to the estimated deficit in the budget of the previous year 2007. However, the percentage of the deficit from the total revenues decreased to (7%) against (9%) in the year 2007. This is considered relatively low, as to its percentage from revenues or the domestic product. It is also considered among the economically reasonable and acceptable rates. However, the deficit may be covered through withdrawal from the contingencies reserves approbation, in case no excess over the budget estimated revenues are realized, he continued.

One of the positive indicators in the budget of the year 2008 is the decline in the percentage of the deficit from the total revenues and from the domestic product. In addition to that, the 2008 budget is taking into consideration the new obligations emerging from the expansion in the government services in the different sectors and areas of development. It also encourages and motivates the continuation of the good economic growth that has been achieved to the national economy during these years. The 2008 budget also reflects the government’s commitment towards building a modern national economy with renewable competitive capabilities that can go along with the current fast transformations taking place in the international arena. This budget also shows the determination of the Sultanate to continue advancement towards providing all requirements of the present times and preparing for the future requisites, he continued.

The total approbation’s for the new projects to be implemented during 2008 amounted to about RO. (425) million, so as to implement a number of development projects. In addition to that a number of other service projects will be implemented during 2008, besides the completion of the ongoing projects, he continued.

As to the performance of the national economy in the year 2008, and in the light of the expected increase in the growth rates of the oil production, the continuance of its high prices thereof and the rise in the growth rate of the government expenditure, in addition to the implementation of some projects as planned, the performance of the national economy will continue its growth at the level of all economic sectors and activities, Macki forecasts.

The original total approbations for civil ministries development program in the Seventh Five-Year Development Plan, which is considered the main drive of the Plan and its executive tool, amounted to about RO. (3016) million. Since the start of the implementation of the Plan and till the end of November 2007 a group of additional projects was approved in response to the Royal Directives during the annual Royal Tours, which emphasized on defining the citizens' urgent needs in the Wilayats and regions and working towards their realization. Also, to implement a number of developmental projects in light of the attention accorded by the government to the development programs and the completion of the basic infrastructure projects. In addition to the additional allocations for the projects of repairing the infrastructure affected by the adverse weather conditions which hit the Sultanate, he added.

The total of these additions amounted to RO. (2357) million and therefore the development program approbations increased by (78%) to reach about RO. (5373) million, as a result of the additions approved under the Plan, he continued.

As for the sectors that received the additions, Macki said that RO. 730 million additional appropriations has been marshaled for road sector to cover RO. (68) million for paving Hasik/Al Shwimiah road, Al Amirat/Qurayyat dual-carriageway by RO. (66) million, Salalah/Thumrait dual-carriageway by RO. (48) million, support of Muscat International Airport fly-over bridge project by RO. (6) million, paving of internal roads in Salalah by RO. (20) million.

RO. (50) million to tackle traffic congestions in Muscat Governorate and raise roads efficiency at contingency conditions of rainfall, promoting the project of paving the express Southern road Al Quraum/Al Naseem Park by RO. (5) million, promoting the project of Al Muladdah/Al Rustaq dual-carriageway by RO. (7) million, he continued.

An amount of RO. (285) million was allocated for the projects of repairing infrastructure affected by the adverse weather conditions which was approved by the Ministerial committee formed as per Royal Directives for repairing the affected infrastructure up to the end of this year, he continued.

Other appropriations are expected to be approved at the beginning of the current year for the completion of repairing the infrastructure in this respect, especially the housing sector. The cost of the projects of repairing the damages incurred by roads, due to the adverse weather conditions, which hit the Sultanate amounted to RO. (188) million including the asphalt and unpaved roads in the Al Batinah and the Al Sharqiyah regions by RO. (30) million, re-paving of Wadi Adai/Al Amirat road by RO. (57) million rehabilitation of Al Bahri road in A'Seeb and constructing bridges by RO. (30) million, rehabilitation of Al Quraum/Al Sarooj road by RO. (4) million, repairing and maintenance of the service roads, lighting and landscaping by RO. (65) million, paving internal (service) roads projects at the different regions of the Sultanate by RO. (212) million, he added.

Macki also pointed out that additional appropriations include RO. 365 million for the ports sector including Marine works project at Al Duqum port by RO. (199) million, construction of quays for the third phase of Sohar Industrial Port by RO. (66) million, RO. (68) million for purchasing (5) ferry vessels: two for the North of Sultanate, two for the South and one for Masirah, expansion and development of the general cargo quays and construction of one quay for fluids for Salalah methanol project in Salalah port by RO. (17) million, establishment of Shannah harbor in the Al Wusta region by RO. (10) million.

Macki also pointed out that there will be RO. 290 million additional appropriations for gas sector including gas supply to Al Duqum industrial estate by RO. (55) million, purchasing compressors and construction of gas pumping stations in Al Buraimi and Fahoud for gas supply to Sohar industrial area by RO. (76) million, gas supply to the methanol plant and the new electricity station in Salalah by RO. (20) million and purchasing and establishment of Nimr (Al Wusta) gas compression station by RO. (20) million, he added.

Macki also pointed out that there will be RO. 66 million additional appropriations for housing sector as work commenced during 2007 on construction of about (1625) new housing units for the citizens in the different areas of the Sultanate, thus raising the housing units, in which work had started during the Seventh Plan, to about 4328.

Macki also pointed out that there be RO. 134 million for ports sector including RO. (111) million for consultancy studies, designing and supervision for improving, developing and renewing of Muscat International Airport and Salalah Airport.

Regarding the plan for developing Muscat and Salalah international airports, Macki pointed out that the Ministry of Transport and Communications and the Ministerial Committee commissioned for improving the two airports are now reviewing the designs and the detailed maps, and preparing the documentation according to the pre-set master plan. It is expected, during the first half of the current year, that tenders for the new runway will be invited. Drawing up the designs for the airport new building is also underway. Macki hoped that its tender invitation will take place before the year end, he added.

The appropriations also include RO. (17) million for the consultancy studies, designing and supervision for the construction of a number of regional airports, he continued.

Work is underway on the designs for construction of (6) regional airports in Sohar, Al Duqum, Ras Al Had, Adam, Haima and Shaleem, he added.

Macki also pointed out that RO. 80 million additional approbations were allocated for health sector including construction of buildings and additional expansions at the University Hospital by RO. (7) million, construction of a hospital in Masirah by RO. (5) million, furthering the polyclinics construction projects in A' Seeb, Sohar, Nizwa and Al Buraimi by RO. (9) million, construction of (6) new health centers in Sumail, BidBid, Wadi Bani Khalid, Al Mudhaybi and Sur by RO. (4) million, the integrated unit project for heart diseases in Sultan Qaboos Hospital in Salalah by RO. (11) million, purchasing medical equipment and instruments by RO. (22) million, he furthered .

Macki also pointed out that there is additional appropriations by RO. 162 million for urban planning and municipal services including removal of residues, pumping water pools and opening the main and internal roads affected by the adverse weather conditions in Muscat by RO. (10) million, rehabilitation and landscaping of parks affected by the adverse weather conditions in Muscat by RO. (10) million, projects for internal roads lighting, beautification and development in a number of Wilayats by RO. (17) million, supporting the development project for Al Hafa area in Salalah by RO. (11) million, RO. (8) million for the expansion of sewerage water treatment and rehabilitation of network in Sohar, completion of lighting the internal roads in Salalah by RO. (5) million, strengthening sewerage networks for nine cities – first phase - by RO. (7) million and modernizing the vehicles and cleaning equipment of Muscat municipality by RO. (6) million, he furthered.

Macki also pointed out that the additional appropriations include construction of dual-carriageways bridges and internal roads in the Governorate of Dhofar to facilitate traffic at a cost of RO. (53) million, the most important of which are implementation of the internal roads in the Wilayat of Mirbat, Sadah city and Hadbeen city, which include the asphalting, lighting, car parking lots, sidewalks, rainfall waters drainage at a cost of RO. (8) million, implementation of the dual-carriageway of (22) main roads in Salalah city that include lighting and the car parking lots at a cost of RO. (9) million, traffic tackling (bridges) for the intersections between Atteen and Al Rabat roads, and between Salalah-Muscat and Al Rabat roads (Um Al Ghawarif roundabout) at a cost of RO. (8) million and implementation of lighting and asphalting works in the workshops area behind the municipality building with the necessary compensations for the workshops’ owners so as to be shifted to the industrial workshop area at a cost of RO. (3) million, he continued.

The Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council also pointed out that the appropriation also includes completion of the ring road from the industrial area to Raysut at a cost of RO. (3) million, transformation of the overhead electricity lines to underground cables and the completion of the lighting of the internal roads in Salalah city at a cost of RO. (10) million, maintenance and changing the sidewalks on the main and sub roads in Salalah city at a cost of RO. (5) million, he added.

Macki also pointed out that there is additional appropriations by RO. 73 million for education sector including projects to Establish and prepare vocational guidance centers and development resources in the educational regions and schools by RO. (13) million, RO. (14) million for implementing the academic plan for post basic education for grades 11 and 12, repairing damages in schools and educational facilities affected by the adverse weather conditions by RO. (8) million, approval of the allocations for70) annual scholarships in Oman Medical College for batches four to eight by RO. (6) million, RO. (8) million for constructing a number of new schools and strengthening the existing ones in the different regions of the Sultanate, he added.

Macki also reviewed the main features of the national economy performance during 2007 in light of the global economy and global oil prices saying that during 2007 the global economy realized a strong growth rate of (5.2%) according to the forecasts of the International Monetary Fund (IMF). This is due to the continued high growth rates in the emerging markets in China, India and Russia where they contributed half of the Global economy growth rate during 2007. Further, it is due to the high growth rates in the low-income countries in Africa and the oil exporting countries resulting from unprecedented high oil prices in the global markets.

Macki also pointed out that the IMF is expecting the continuance of the international growth in 2008 but at lower rates reaching (4.8%). This decline is ascribed to the growing unrest in the financial markets due to the problem of the real estate mortgage market in USA weakness of the US$ and the increased inflationary pressures arising as a result of the increase in the oil and commodities prices.

It is also expected that oil prices will continue their current increase in 2008 as a result of the strong demand, which is linked, from one side, to the economic growth and to the congestions in the refining capacities, retraction of stock levels and other geopolitical factors, he continued.

Pointing to the main features of the national economy performance during 2007, Macki said that preliminary estimates of the GDP indicate that the national economy will achieve a growth rate of (11.6%) continuing its characteristic increasing growth in the recent years. The good performance of the national economy is due, from the one hand, to the increase in oil prices and, from the other hand, to the appropriate environment that is conducive to growth which was facilitated by the economic and monetary policies followed by the government. In addition, it was due to the strong local demand and improvement in the non-oil exports performance, he added.

One of the positive features of the national economy performance in 2007 was that all the main activities contributed to this growth. The value added to the oil activities, in spite of the decline in the production rates by (3.7%) compared with 2006, will grow at a rate of (5.5%) due to the increase in the oil prices and the increase in the demand for natural gas, he added.

The non-oil activities are expected to grow by (17%). The leading activities for this growth were the refined oil products (80%), mining and quarries (30%), wholesale and retail trade (30%), transportation, warehousing and communications (26%), and construction (25%), he continued.

For the purposes of the budget, estimates for the oil prices were based on (40) US dollars in 2007 budget. Despite the additional projects which were sanctioned during the year and the financial approbations which were allocated to cover the different elements of public expenditure, it is expected, in view of the high international oil prices, that the actual budget will achieve a financial surplus in the amount of RO. (1720) million after covering the deficit. This surplus shall be utilized to strengthen the financial reserves of the government as well as pay up some of the actuarial dues of the retirement funds, he furthered.

As for foreign trade, Macki pointed out that the expectations indicate an increase of the overall proceeds of exports in 2007 by (4%) compared with 2006. The oil exports are expected to grow by (0.7%), and the non-oil exports of Omani origin are expected to increase by (9%) by virtue of the increase in the exported quantities of LNG and the increase in its prices that are linked to the oil prices. Also the proceeds from re-export operations are expected to increase by (18%), he continued.

Imports value is expected to increase by (46%) in 2007 compared with 2006 as a result of the increase in commodity prices in the international markets, retraction of US$ exchange rate against the other foreign currencies, in addition to the strong domestic consumption and investment demand. In view of this, the balance of trade surplus will decrease in 2007 by (31%) compared with 2006, he added.

The inflation rate during the period (January-October 2007) amounted to about (5.3%) compared with the same period in 2006. This increase is mainly related to the group of foodstuff and other consumer goods. The increase in the inflation rate is attributed to the increase in the growth rates of the national economy and the rise of international prices of commodities, in addition to the retraction of the US$ exchange rate against the other foreign currencies and the strong local demand, he furthered.

As to the privatization program, the work on its implementation is effectively progressing in a good way. The consultancy group appointed to evaluate the privatization experience in the electricity and water sector confirmed the success of the experience, in respect of restructuring of the sector and motivating the private sector to invest therein. Thus subsidy to electricity decreased in the year 2007 from RO. (135) million to RO. (118) million, he added.

With regard to the tourism sector, upon which the Sultanate very much counts, in view of its several potentials, the preliminary data for 2007 indicate that the sector is expected to grow by a rate exceeding (8%). This is due to the increase in the accommodation capacities and the efforts exerted to promote the tourism in the Sultanate. It is noteworthy that the contribution of the tourism sector in the Gross Domestic Product (GDP) greatly exceeds the current estimates of about (1%), which is based on the performance of hotels and restaurants only, he furthered.

The Ministry of National Economy, in collaboration with the Ministry of Tourism is establishing an integrated system for tourism sector accounts that reflects the real contribution in the national economy. A number of statistical surveys are now being conducted for measuring the spending of the inbound tourists and the spending of the residents on internal tourism. The results of these surveys shall constitute the necessary base for measuring the real contribution of the tourism sector in the national economy, he continued.

By looking at the private investment in the major tourism projects, it should be noted that the seventh five-year development plan witnessed the start of the real implementation of a number of major tourism projects, such as, the wave project, Salam Yetti, the tourism project in Shaa in Dhofar Governorate, the commercial tourism complex in Salalah and the tourism resort in Zighi in Musandam Governorate – scheduled to be inaugurated during 2008. Preparations are effectively progressing for commencing on the implementation of another number of big tourism projects, such as Al Seefa resort, Barr Al Jissa, the Blue City and two tourism resorts in Musandam Governorate, he said.

With regard to Muscat Securities Market (MSM) during the period (January–November 2007), it recorded a distinguished performance compared with the same period in 2006. The general index of the market rose to (8443) points compared with (5467) points realizing gains of (54%). The market value of MSM increased to RO. (9) billion compared with RO. (6) billion, i.e. an increase by (50%).