Overview
Oman’s return to a fiscal surplus in 2022, after nearly a decade of budget deficits, marked a turning point in the Sultanate’s public finances and validated the comprehensive fiscal reform programme implemented under the Medium-Term Fiscal Plan. The surplus resulted from the combined effects of higher oil prices, new tax revenues from VAT and other measures, reduced subsidy expenditure, and improved spending efficiency. Credit rating agencies and international investors took positive notice of this achievement.
Key Points
The surplus was achieved through a combination of revenue-side and expenditure-side reforms. Oil revenues benefited from prices above budget assumptions, while non-oil revenues grew substantially due to VAT collections and improved fee administration. Spending discipline was maintained through performance-based budgeting and rigorous procurement oversight. Public debt management strategy included early repayment of high-cost obligations and refinancing of existing debt at more favourable terms. The surplus was allocated between debt reduction and capitalisation of the Oman Future Fund.
Current Status
The 2022 surplus was followed by consecutive surpluses in 2023 and 2024, demonstrating that the fiscal improvement was structural rather than merely cyclical. Credit rating agencies upgraded Oman’s outlook and, subsequently, its ratings. Government bond spreads narrowed, reducing borrowing costs. The debt-to-GDP ratio has declined from its peak, improving fiscal sustainability metrics. International financial institutions have praised the reform trajectory.
Vision 2040 Context
The fiscal surplus vindicates the Vision 2040 fiscal strategy and provides the financial foundation for sustained investment in diversification. A balanced budget demonstrates to investors and citizens alike that Oman can manage its public finances responsibly. The surpluses enable the government to invest in education, healthcare, infrastructure, and innovation without accumulating unsustainable debt, creating a virtuous cycle of reform and growth.