(MENAFN - Muscat Daily) The government of Oman could prioritise fiscal-policy reforms aimed at the diversification, broadening and rationalisation of revenues, as fiscal sustainability is an important challenge in the long run, according to the Central Bank of Oman (CBO).
In its annual report released on Thursday, CBO said that fiscal sustainability, in the long run, is an important challenge that the government would be facing. ''Though the fiscal position remains comfortable, the fact remains that Oman depends to a large extent on hydrocarbon export revenues. In view of this, the government is focusing on prudent fiscal management. There is an attempt by the government in the 2014 budget to rationalise and control government spending to sustainable limits and at the same time improve the structure of non-oil revenues,'' the report said.
CBO said the challenge is to balance the current policy to sustain growth along with increased current expenditures in the light of social pressures. ''The government has to contend with several key challenges in terms of increasing employment opportunities for the young population, raising salaries and allowances and at the same time continuing with investment activities to augment growth. The current expenditures are mainly in the form of current consumption and are harder to reverse.''
CBO further said that the resources available with the government remain finite and also vulnerable to oil price fluctuations. ''The government could prioritise reforms aimed at diversification, broadening and rationalisation of revenues. There could be a case for reviewing the exemptions in various taxes and the new sources of revenue for the government. As the economy diversifies, areas which could earn revenues for the government could be identified,'' it added.
The CBO report added that there could be a need to mould the expenditure pattern in such a way that the benefits of higher oil and gas revenue are directed more towards sustaining the long-term growth prospects of the sultanate, rather than current consumption.
''The assumption with respect to projected increases in expenditure and revenue for 2014 appears to be conservative, which could be seen as a step towards fiscal sustainability. The emphasis is also on increasing domestic and foreign investment and promotion of public-private partnership,'' the CBO report s