Government to take major steps to enhance fiscal discipline

Oman government plans to bring in a series of measures for effective fiscal discipline, which include formation of a special cell within the finance ministry for building a ‘fiscal model’ for public finance, a separate unit for public debt management and efforts to improve credit rating.

An important decision, which was announced as part of State Budget 2017, was formation of a separate unit entrusted with the public debt management at the ministry. This unit will plan, organise and manage government debt. 

The Sultanate plans to borrow OMR2.1 billion from overseas markets and another OMR400 million from the domestic market this year to plug in a projected deficit of OMR3 billion. Oman’s government last week announced a budget expenditure of OMR11.7 billion and a total revenue of OMR8.7 billion for 2017, leaving a deficit of OMR3 billion.

Besides, there is a move to modernise Government Fiscal Management Information System (GFMIS) and transition from cash-based accounting to accrual accounting. This system develops a method for recording government accounts and links them to national statistics, which will facilitate the monitoring of public spending, and ensure fiscal discipline, said the Ministry of Finance in its budget statement.

“I think, the government will have more control in terms of public spending priorities, objectives and bringing in more accountability,” said Kanaga Sundar, head of research at Gulf Baader Capital Markets.

“This is crucial and will help in better fiscal management in future,” he added.

There is also an effort to improve the Sultanate’s credit rating, which will help to get debt at relatively cheaper rates. It appears that the plan is to take corrective measures as and when the international credit rating agencies plan to lower the sovereign rating.

As part of the whole exercise, there was also a move to improve the performance of government investments by establishing a holding company in every sector. As part of this initiative, the authorities have already formed several holding companies for specific sectors like transport and logistics and transferred government stakes in the respective companies to the holding firms.

The holding company will make optimum use of available means of resources and will avoid duplication of efforts.

Also, there is a move to continuously monitor fiscal performance of the budget and take measures needed to strike a balance by 2020. This can be achieved by capping spending and enhancing revenues over the medium-term, in line with the overall framework of the five year plan.

Source:Times Of Oman