meed-logo

line1 line2 line3
SIGN IN / REGISTER

Muscat performs tricky budget balancing act

12 December 2023

 

On 11 November, Oman’s Etco Space sent its first nano-satellite, Aman-1, into orbit aboard a SpaceX Falcon 9 rocket launched from California. It is the sort of endeavour Muscat is keen to promote as it tries to diversify its economy.

Etco Space chief executive Abdulaziz Jaafar said his company will be “pushing the boundaries of our space programme in the coming months and years”. It aims to launch more satellites and get involved in deep-space missions. 

Oman’s economy needs to find new areas to exploit. GDP growth slowed from 4.3 per cent in 2022 to 1.3 per cent in 2023, according to the Washington-based IMF. The organisation expects the growth rate to revive to 2.7 per cent in 2024, but that is at least partly dependent on a rebound in hydrocarbons production.

This may not come to pass. Oman is part of the wider Opec+ arrangement to curb production and at the group’s meeting on 30 November, Oman agreed to cut 42,000 barrels a day (b/d) from its output during the first quarter of 2024. Opec said the cuts will be gradually unwound later in the year “subject to market conditions”.

Soft oil prices

It is not just about output, however. Oil prices have also been weaker in 2023. The Finance Ministry says Oman received $81 a barrel on average in the first nine months of 2023, compared to $94 in the same period last year. 

Caroline Bain, chief commodities economist at Capital Economics, said the Opec+ cuts “should at least act as a floor under prices at current levels, but we would be surprised if it prompted a sustained price rally”.

As it stands, Oman’s net oil revenues were RO4.8bn ($12.5bn) in the first nine months of 2023, 10 per cent lower than a year ago. 

Gas revenues have fallen even more significantly – by 42 per cent to RO1.6bn – prompting an overall drop in public revenues of 16 per cent, or RO1.7bn.

Wider market dynamics mean the pressure is likely to continue into 2024. Bhushan Bahree, executive director at S&P Global Commodity Insights, says that crude prices are “under pressure from a looming oil over-supply early next year”, amid strong oil production growth in the Americas.

The economic pressures follow a period of fairly benign conditions. High oil revenues in recent years have enabled Omani authorities to post fiscal and current account surpluses and pay off some sovereign debt. 

Such trends have prompted the main credit ratings agencies to issue upgrades. In May 2023, Moody’s Investors Service promoted Oman from Ba3 to Ba2, while both Standard & Poor’s and Fitch Ratings upgraded the sovereign from BB to BB+ in September.

Debt and spending

Government debt rose from just 5 per cent of GDP in 2014 to a peak of 68 per cent in 2020, but since then there has been a concerted effort to reverse that trend. By 2022, it had dropped to 40 per cent of GDP and Fitch predicts it will stabilise at about 35 per cent in 2024-25. 

Overall public debt is now at about RO16.3bn, levels last seen in 2018-19.

Despite the lower oil and gas revenues, the government has kept its spending discipline, with expenditure down 14 per cent in the first nine months of the year. This has meant the budget remains in surplus, albeit at lower levels than in 2022. Figures from the Finance Ministry show a surplus of RO791m for the first nine month of 2023, down from RO1.1bn in the same period a year earlier.

In the longer-term, Oman is pinning much of its hopes on hydrogen production. Hydrogen Oman (Hydrom) signed five deals for projects in Duqm in mid-2023, involving total potential investment of $30bn. It is hoping a second round of deals, covering blocks of land in the Dhofar region, could attract a further $20bn-$30bn, with awards due in early 2024.

Hydrom managing director Abdulaziz al-Shidhani has said total investments in the sector could reach $140bn by 2050, by which time the country is hoping to produce 8 million tonnes a year (t/y) of green hydrogen. There is an interim target of 1 million t/y by 2030.

Even if these investment and production targets are achieved, oil and gas will remain central elements of the Omani economy for some time. In a sign of the sector’s continuing importance, the $7bn OQ8 refinery project in Duqm is due to be completed by the end of 2023, with partners OQ and Kuwait Petroleum International aiming to process about 230,000 b/d of oil once it is up and running. 

Compared to the undulations in oil and gas and the wider economy, Oman’s political scene is far more stable. Since taking over in 2020, Sultan Haitham bin Tariq al-Said has pushed economic reforms but made few changes on the political side, other than gradually adjusting some of the key personnel. In late October, he appointed new governors to take over in South Al-Batinah, North Al-Sharqiyah and Al-Wusta.

There have also been public protests in Muscat over the Gaza war, but they have been more limited than some other demonstrations in recent years, such as the protests against high unemployment and inflation seen in 2018 and 2019 in cities around the country. 

As long as the government can keep the economy relatively stable, it should also be able to maintain the political equilibrium.

MEED's January 2024 special report on Oman also includes:

> BANKING: Omani banks look to projects for growth
> POWER & WATER: Oman expands grid connectivity

https://image.digitalinsightresearch.in/uploads/NewsArticle/11364460/main.gif
Dominic Dudley

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • UAE banks ready to weather the storm

    8 April 2026

     

    Amid unprecedented turbulent geopolitics, Emirati lenders are putting on a confident face. More than one month in from the Iran conflict, Dubai’s largest bank, Emirates NBD, raised $2.25bn in long-term financing – obtaining, it said, the tightest pricing in the bank’s history for a syndicated loan, which aims to strengthen the bank’s liquidity position.

    Bankers view this as a token of the sector’s resilience. “Strong oversubscription from international lenders, together with tight pricing, reflects continued market confidence in the UAE’s financial sector,” said Shayne Nelson, Emirates NBD’s CEO.

    UAE banks entered the crisis in a strong position. Capital and liquidity buffers are robust, with an aggregate capital adequacy ratio of 17.1% in Q4 2025 – well ahead of the minimum 10.5% level. The loan-to-deposit ratio stood at 77.7%, another metric indicating its latitude to extend ample credit to the economy.

    Performance levels last year were impressive. Total assets in the UAE banking system rose 17% in year-on-year terms to AED5,340bn ($1.45bn) by end-2025. Asset quality ratios improved, supported by a 16.2% reduction in non-performing loans (NPLs). Large banks revealed strong profits. The largest Emirati lender, First Abu Dhabi Bank, reported a 24% increase in net income to AED21.11bn ($5.7bn), while Abu Dhabi Commercial Bank similarly saw full-year pre-tax profits rise by 21% to AED12.8bn.

    Analysts paint a picture of a broadly healthy banking system, at least pre-conflict. “In 2025, we saw some margin pressure, as competition for liquidity increased. UAE banks’ profitability metrics declined a bit. But banks entered this crisis in the best shape for the last 10 years. Take the NPL ratio; at around 3%, it’s been on a declining trend for the last five years,” says Anton Lopatin, senior director, financial institutions at Fitch Ratings.

    Support package

    The events since 28 February have clearly ruffled the surface calm, although the UAE Central Bank has stepped in to provide additional support, announcing on 19 March a resilience package mainly made up of precautionary support measures focused on liquidity and forbearance. This comes amid reports of a sharp decline in liquidity in the banking system.

    The package allows lenders to access liquidity and to use capital buffers to support the economy. Banks enjoy enhanced access to reserve balances up to 30% of the cash reserve requirement.

    “The central bank has a strong ability to support banks in the UAE, as it has AED1tn ($270bn) in external reserves. It means that it is able to provide support if needed, backed by these reserves,” says Lopatin. 

    According to Lopatin, overnight deposits at the Central Bank have declined slightly since the conflict escalated, but nothing too severe. “Judging by liquidity indicators at the sector level, it’s under pressure, but it’s still healthy,” he says.

    Ongoing risks

    Nonetheless, a protracted conflict would raise asset quality concerns, given the likely impact on companies in sectors such as infrastructure, real estate, tourism and aviation – those most exposed to war-related effects. In the UAE, hospitality, tourism and real estate also have weaker links to the sovereign.

    Disruption to air traffic and tourist inflows is likely to have only a small direct impact on UAE banks, whose lending to the transport (mostly aviation) and tourism sectors is limited. Fitch estimates the two combined accounted for less than 3% of total loans at end-2025.

    “The UAE has always been sensitive to the real estate market performance. It has recovered strongly since Covid, with prices up by 60%. But if there is less economic activity, and less belief in Dubai as a safe jurisdiction, real estate would be among the first sectors to suffer,” says Lopatin.

    Corporate real estate accounted for 13% of gross loans at end-2025, down from 20% at end-2021, and this sector is likely to be the main source of new Stage 3 loans if the conflict is prolonged, warned Fitch in a rating note issued on 2nd April.

    Some banks still have high concentrations in their loan books, namely Sharjah Islamic Bank (29%), Ajman Bank (28%), Commercial Bank International (CBI; 41%), Commercial Bank of Dubai (20%) and United Arab Bank (UAB; 20%). Their asset-quality metrics could weaken, said Fitch, adding profitability pressures, if the real estate price correction exceeds its pre-conflict expectations.

    Already, two Dubai property developers have seen their sukuk (Islamic debt securities) fall into distressed territory, as investor concerns about credit quality and refinancing risks start to register. In mid-March, Fitch Ratings placed Dubai real estate firm Binghatti on a negative rating watch, signalling a potential downgrade.

    Too early to assess

    Yet analysts caution against reading too much into this at this stage. “UAE banks’ total exposure to real estate is not so significant,” he says. “Currently, it’s less than 15%, the lowest level in 10-15 years. Any impact on banks will be gradual, but it will be under pressure, so banks will be under pressure too.  Some smaller UAE banks entered this crisis with less cushioning and higher NPLs and therefore could be affected more.”

    Refinancing risk may also affect the government-related entity (GRE) sector, with these anticipating around $11.5bn in debt maturing this year, according to estimates from Capital Economics, a consultancy.    

    If the refinancing of GRE debt proves too expensive, then UAE banks may have to step into the breach with new credit facilities. 

    “The longer the conflict lasts, refinancing becomes a point of stress,” says Lopatin.

    The capacity of the likes of Emirates NBD to raise finance in the most trying conditions suggests a wider resilience that may stave off worst-case scenarios for UAE banks. The next weeks and months will doubtless be testing for them, and the possibility of cash flow problems yielding a worsened loan quality position is one that will be taken seriously. 

    However, the capital and liquidity buffers painstakingly built up since the Covid pandemic mean banks are ready to weather the storm.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16251184/main.gif
    James Gavin
  • Dubai extends bid deadline for Jebel Ali STP expansion

    8 April 2026

     

    Dubai Municipality has extended the deadline for contractors to submit bids for a contract covering the expansion of the Jebel Ali sewage treatment plant (STP) phases one and two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cubic metres a day (cm/d), with the expansion estimated to cost $300m.

    The scope includes the design, construction and commissioning of infrastructure and systems required to support the increased capacity.

    The new bid submission deadline is 30 April. The original deadline was 2 April.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The main element of the expansion involves modifications to the secondary treatment process at Jebel Ali STP phase two.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    It is understood that the project is part of long-term plans to treat about 1.05 million cm/d once all future phases are completed.

    MEED recently revealed that the municipality is preparing to tender the main construction package for the Warsan STP by the end of the year.

    As MEED understands, the Warsan STP had previously been expected to be procured as a public-private partnership scheme.

    However, the main construction package will now be procured as an engineering, procurement and construction contract.

    The project involves the construction of a sewage treatment plant with a capacity of about 175,000 cm/d, including treatment units, sludge handling systems and associated infrastructure.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16298710/main.jpg
    Mark Dowdall
  • Prequalification begins for King Salman Stadium early works

    8 April 2026

    Saudi Arabia’s Sports Ministry has invited companies to prequalify for a contract covering early works at the King Salman International Stadium in Riyadh.

    The notice was issued on 8 April, with a prequalification deadline of 28 April.

    The stadium will cover about 660,000 square metres (sq m) and have a seating capacity of 92,000. Facilities will include a 150-seat royal suite, 120 hospitality suites, 300 VIP seats and 2,200 dignitary seats.

    The wider development will include sports facilities covering more than 360,000 sq m, including two training fields and fan zones, a closed sports hall, an Olympic-sized swimming pool, an athletics track, and outdoor courts for volleyball, basketball and padel.

    The stadium is set to host the final of the 2034 Fifa World Cup and will serve as the Saudi national football team’s main base.

    US-based architectural firm Populous is the lead architect for the stadium.

    Construction of the stadium is expected to be completed by 2029.

    The stadium will be located next to King Abdulaziz Park.

    Firms submitted prequalification statements for the main design-and-build contract in February.

    Saudi Arabia stadium plans

    In August 2024, MEED reported that Saudi Arabia plans to build 11 new stadiums and refurbish four facilities for the 2034 Fifa World Cup. 

    Eight stadiums will be located in Riyadh, four in Jeddah and one each in Al-Khobar, Abha and Neom.

    A further 10 cities will host training bases: Al-Baha, Jazan, Taif, Medina, Alula, Umluj, Tabuk, Hail, Al-Ahsa and Buraidah.

    There are expected to be 134 training sites across the kingdom, including 61 existing facilities and 73 new venues.

    Saudi Arabia was officially selected to host the 2034 Fifa World Cup during an online convention of Fifa member associations at the Fifa Congress on 11 December 2024.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16298708/main.jpg
    Yasir Iqbal
  • PDO awards Oman gas plant expansion project

    8 April 2026

     

    Petroleum Development Oman (PDO) has awarded the main contract for a major project to expand the Birba gas station in the Dhofar governorate in southern Oman.

    Known as the Budour-Northeast Birba integrated project, PDO intends to execute engineering, procurement, construction (EPC) and commissioning of units to process additional volumes of sour gas.

    Egypt’s Engineering for the Petroleum & Process Industries (Enppi) has won the contract to perform EPC works on the project, according to sources.

    The value of the contract awarded by PDO to Enppi is unknown. The Budour-Northeast Birba integrated project was earlier estimated to be worth about $300m.

    MEED reported last year on the two-way fight between Enppi and India-based Larsen & Toubro Energy Hydrocarbon (L&TEH) for the project’s main EPC contract.

    MEED previously reported that contractors submitted technical bids for the project by the deadline of 30 January 2025. Aside from Enppi and L&TEH, Greece/Lebanon-headquartered Consolidated Contractors Company (CCC) and Abu Dhabi’s NMDC Energy were understood to have submitted technical bids, but are thought to have later withdrawn from the race.

    Enppi and L&THE submitted commercial bids for the project by the 11 June deadline, MEED previously reported.

    After receiving prices, however, PDO appeared to slow down the bid evaluation process for the project’s contract award. The majority state-owned oil and gas producer engaged bidders for discussions and negotiations in the meantime, eventually asking them to extend the validity of their bids until April, one source said.

    The greenfield and brownfield scope of work on the project covers the following:

    • New separator train at the Birba gas station to perform three-stage separation
    • New gas dehydration unit
    • Two new gas injection compressors
    • New gas recovery compressor
    • New gas booster compressor
    • Installation of utility units, such as electrical infrastructure, flare system, drainage, etc
    • New high-pressure flare
    • New instrumentation air package
    • New nitrogen system
    • New drainage vessel
    • Debottlenecking of AP flare header by increasing the flare header size
    • Modification inside existing 33kV gas-insulated switchgear in Birba gas station substation
    • Modification of existing 6.6kV switchboard
    • Interfaces with existing control room
    • Civil and piping interfaces within the Birba gas station facility

    In December, PDO achieved a final investment decision on another major project to build an integrated facility to produce natural gas from the Budour and Tayseer fields in Oman.

    Kuwait‑based Spetco International Petroleum Company (Spetco) won the main design, build, own, operate and maintain (DBOOM) contract for the combined Budour-Tayseer sour gas processing facility project. The value of the contract won by Spetco is $683m.

    PDO awarded Spetco the 15-year contract in September, as MEED reported, with the official signing between the parties taking place in December.

    The project aims to expand the capacity of the existing gas production and processing facility at Tayseer. It represents the second development phase of the gas field. Through the project, PDO is also seeking to appraise, produce and process sweet gas from the Budour field, located about 50 kilometres west of the Tayseer field.

    ALSO READ: 
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16298603/main0506.jpg
    Indrajit Sen
  • Saudi firm to develop $300m Syria Beaumont project

    8 April 2026

    Syria’s Ministry of Tourism has partnered with Riyadh-based firm Ezdihar Holding to develop The Beaumont, described as the country’s first fully integrated residential, commercial and leisure scheme.

    The 77,000-square-metre project is expected to cost $250m-$300m and is positioned as a flagship development aimed at supporting tourism sector recovery, while boosting investment, job creation and skills development.

    Plans include two towers on the Barada River waterfront.

    The first will house a five-star, 150-key hotel with presidential suites, multiple food and beverage outlets, a private members’ club and a spa.

    The second will feature 26 floors of high-end residential units, ranging from one-bedroom serviced apartments to 570-square-metre duplex penthouses overlooking the city.

    Additional components include a two-level retail centre, an outdoor promenade with cafes and restaurants, and a 10-storey business centre targeting regional and international occupiers.

    The project will be delivered through a 50-year joint venture between the Ministry of Tourism and Ezdihar Holding, operating with financial and administrative autonomy.

    Located near Umayyad Square in Damascus, the development is intended to serve as a base for companies seeking regional or national headquarters, alongside a mixed-use destination combining hospitality, retail and leisure offerings.

    Construction will be carried out in phases, with completion targeted within four years.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16298370/main.png
    Yasir Iqbal