Oman government investment income to drop amid drawings from reserves

Muscat: A substantial fall in investment income of Oman government is expected this year, mainly due to a drop in yield and drawing on reserves in recent years to meet budget deficits.
According to the state budget, income from government investment is expected to fall by 60 per cent to OMR200 million this year, from as high as OMR500 million in the proposed 2016 budget.
Although a large portion of deficit financing is coming from borrowings, there are withdrawals from sovereign wealth funds, as well. “So, this is resulting in a significant decline in income from government investments,” said Ashok Hariharan, Partner and Head of Tax for KPMG in the Lower Gulf.
In response to the projected deficit of OMR3 billion for 2017, the Omani government plans to borrow OMR2.1 billion from overseas markets, OMR400 million from the domestic market and OMR500 million by way of drawing on the sovereign fund.
The recent disinvestments, especially diluting its stake in Oman Telecommunications Company (Omantel), also resulted in a drop in income from investments. The Omani government sold 19 per cent of its holding in Omantel in 2013 as part of its privatisation efforts.
Hariharan, who was delivering a detailed presentation on the state budget last week, said that miscellaneous revenue in 2017 is going to increase by 714 per cent to OMR298 million, from OMR36 million.
Also, revenue from corporate income taxes is estimated to decline to OMR400 million, indicating a 23 per cent fall from the 2016 budget proposal of OMR520 million.
Total tax and fee revenues is estimated at OMR1,423 million for 2017, against OMR1,329 million in the previous year.