Oman uses oil windfall to boost foreign reserves

MUSCAT, Oman (Reuters) -- Oman is using much of its extra income from this year's oil windfall to boost foreign reserves and plans to increase spending beginning next year, officials said on Tuesday.

"We have transferred $11.36 per barrel from $25.86 per barrel we have earned in this period (January-July) to top up the reserve funds as we have planned in the 2000 budget," an official at the Economy Ministry told Reuters.

Oman traditionally does not issue figures for its foreign reserves.

An Economy Ministry report said Oman's average oil price rose 90 percent to $25.86 per barrel in the first seven months of 2000, from $13.65 in the same period last year.

The Gulf Arab state's net earning from crude exports went up by 67 percent to 879.1 million rials ($2.28 billion) up until July this year compared with 526.1 million rials in the first seven months of 1999, the report showed.

"The deficit is narrowing together with other factors. Hence, we expect to invest heavily ... regardless of the oil prices," a Ministry of Finance official told Reuters.

Another official said the government had plans to boost spending in 2001.

Economists have been urging the government to boost spending to revive the economy, partly by relaunching projects it had shelved when oil prices took a steep dip in 1998.

"What the government is trying to do is to have sound financial reserves to protect itself against oil price fluctuations, but it needs also to look beyond the balance between revenue and expenditure and start spending more," said Said al-Riyami, economic expert at the Commerce Ministry.

A senior banker said: "I think Oman has already achieved a good balance in terms of revenue, expenditure, reserve funds and even deficit, and it is time it started injecting funds to big projects like aluminum and petrochemicals to diversify the economy before it starts to stall."

The Economy Ministry official said the Gulf Arab state's budget deficit had narrowed to 143.6 million rials between January to July this year from 337.2 million rials in the same period in 1999.

Total government revenues, after the transfer to foreign reserves, increased by 35 percent between the two periods to 1.15 billion rials from 850 million rials.

The report put public spending at 1.3 billion rials in the year to July 2000, compared with 1.19 billion rials a year earlier.

Oman calculated the 2000 budget on the basis of an oil price of $14.50 a barrel and said any extra revenue would go to strengthen its foreign reserves.

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