Definition
Fiscal sustainability refers to a government’s ability to maintain its current spending, taxation, and borrowing policies indefinitely without threatening solvency or requiring drastic future adjustments. A fiscally sustainable government can service its debt, fund public services, and invest in development without accumulating unsustainable liabilities. For hydrocarbon-dependent nations, fiscal sustainability hinges on reducing reliance on volatile oil revenues and building diversified tax bases.
Context in Oman
Oman faced mounting fiscal pressure after the 2014 oil price collapse, running consecutive budget deficits that pushed public debt above 60 percent of GDP by 2020. In response, the government launched the Medium-Term Fiscal Plan (MTFP), which introduced VAT in 2021, restructured subsidies, initiated privatisation of state-owned enterprises, and imposed spending ceilings on ministries. These measures, combined with higher oil prices in 2022 to 2023, allowed Oman to record budget surpluses, repay debt, and rebuild reserves. Credit rating agencies all upgraded Oman sovereign rating in 2023.
Key Data Points
| Metric | Value |
|---|---|
| Public debt-to-GDP (2023 est.) | ~37 % |
| Fiscal break-even oil price (2024) | ~USD 73/barrel |
| VAT rate (introduced April 2021) | 5 % |
| Budget surplus (2023) | ~OMR 0.8 billion |
| Sovereign credit rating (Fitch 2024) | BB+ positive outlook |
Vision 2040 Connection
The governance and institutional performance pillar of Vision 2040 explicitly targets fiscal resilience. Long-term goals include bringing the fiscal break-even oil price below USD 50 per barrel, maintaining public debt below 30 percent of GDP, and growing non-oil revenue to more than 35 percent of total government income. These targets guide annual budget planning and medium-term expenditure frameworks.
Further Reading
- [[What is VAT in Oman]]
- [[Oman Tax System Overview]]
- [[What is Non-Oil GDP]]