Under Control
HE Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council, shares his thoughts with OER on the economic health of the Sultanate vis-à-vis the fall in oil prices and the global financial crunch

Managing the financial resources of country is a delicate balancing act when viewed through the prism of a global economic situation, which presently lies shattered and distorted into an ugly recessionary scenario.

Financial experts say that Oman has adopted a prudent approach to sustain the economy against the backdrop of a slump in oil prices and crippling global financial crisis. But the last word is with the person who holds the crucial position – His Excellency Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of the Financial Affairs and Energy Resources Council. Excerpts of an interview with HE Macki.

From a macro-economic point of view, what effect will there be on the national economy due to oil prices falling below $40 per barrel?
The recent sharp decline in crude oil prices can be expected to reduce government revenue from oil, but this is expected to be atleast partly offset by rising government revenues from other sectors of the economy, for example the major industrial projects in Sohar like the refinery and petrochemicals.

The broader economy will also benefit with contributions from private sector projects like methanol and income associated with tourism and other sectors including transport and communications; a consequence of the government’s drive to diversify the economy.

Is there any benefit for the Sultanate from the global slowdown?
The fall in oil prices and the slowdown in the global economy have already caused a slowdown in commodity and food prices which are expected to help reduce inflationary pressures.

What is the impact on the projects that were planned before the price of oil went down?
The macro-economic effects of the lower oil prices and the global slowdown can be expected to have both positive and negative impact on the economy. Obviously, Oman may receive lower oil revenues, but the sharp increases in costs associated with new projects that affected this region in recent years are already being moderated and the inflationary affect of the rising cost of construction materials, food and other key imports is expected to moderate further and should provide benefits to the economy. In addition the government is committed to continuing major strategic projects, which if necessary will be funded from surpluses. The government’s prudent policies place Oman in a strong economic position to continue growth and development.

What are your comments on the 2009 budget which has been presented by you?
As in previous years, the government has maintained a prudent approach in developing its budget and while there have been a number of fundamental reviews of government expenditure and revenue there has not been the need for any significant changes in the budget. You will recall that the 2008 budget was based on an oil price of $45 per barrel and this year’s budget is again based on $45 per barrel.

The government expects that Oman’s economy will continue to grow in 2009, albeit not as rapidly in recent years. The government is committed to achieving sustained economic growth and all major strategic projects will proceed as planned.

The government is continuing its efforts to diversify the economy and create new employment opportunities through the creation of new industries. Housing, education, health and other important social programmes will also continue to executed.

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