Oman Budget 2022: Key Highlights

05 January, 2022

In brief

His Majesty Sultan Haitham bin Tarik issued a Royal Decree (“RD”) on 1 January 2022, published in the Official Gazette on 2 January 2021, promulgating the 2022 State Budget (RD 1/2022). In this News Alert, we are setting out the key features of the 2022 State Budget.


In detail

Snapshot of the key features 

Oman budget 2022

Royal Decree No.1/2022 was issued on 1 January 2022, and published in the Official Gazette dated 2 January 2022, promulgating the State’s Budget for the year 2022. Below are the key features of the 2022 budget :

Projected Revenue OMR 10.6 billion
Projected Expenditure OMR 12.1 billion
Projected deficit OMR 1.5 billion
Projected income from the Oman Investment Authority (“OIA”) OMR 0.8 billion
Projected investments by the OIA OMR 2.9 billion
Projected investments by Energy Development Oman (“EDO”) OMR 1.2  billion
Projected average oil price $50

Oman is projecting a fiscal deficit of OMR 1.5 billion in 2022, down 32% year-on-year, as growth in state spending is outpaced by a stronger growth in revenues on the back of projected higher oil and gas receipts.

Revenues and expenditures were estimated, taking into account the framework of the medium-term fiscal plan (the 10th Five-Year Development Plan (2021-2025)) impacted by such factors as changes in oil price estimates, the ongoing uncertainty arising from dealing with the Covid-19 pandemics and the establishment of the Oman Energy Development Company. Also important in determining the budget are the set of foundations and assumptions that aim in their entirety to ensure the continuity of providing public and basic services such as education, health, housing and social welfare, alongside improving the business environment and stimulating investment.

Oil and gas revenues are forecasted at around OMR 7.2 billion, or 68% of overall receipts, up from OMR 5.4 billion in 2021, when it made up 63% of the total. Oman's projected revenue figures are based on an assumed oil price of $50 per barrel, up from an expectation of $45 per barrel in the 2021 budget. The projected average oil price seems to be on a conservative basis considering that the current oil prices are relatively higher. Oman's fiscal breakeven oil price needed to balance its 2022 budget will be $67 per barrel, compared with $74 per barrel in 2021. 

The uptick in expected oil and gas revenues come as a result of both higher oil prices and higher oil production, in line with the ongoing Opec+ production restraint deal. Oman has seen its production ramp up in a stepwise manner since the middle of last year as the Opec+ group gradually restores all the oil it took off the market in May 2020 in response to the Covid-19-induced collapse in global oil demand.

Economic developments in Oman
Middle East

Summary of State Budget released in Royal Decree 1/2022
  2022 Budget 2021 Budget 2021 actuals*

Target oil prices at $50/bbl

Target oil prices at $45/bbl Average oil prices at $61/bbl
OMR (m) % of total % change from 2021 OMR (m) % of total OMR (m) % change from 2021 budget
Oil 4,490 42% 26% 3,550 41% 5,555 56%
Gas 2,750 26% 47% 1,870 22% 2,628 41%
Total Oil and Gas 7,240 68% 34% 5,420 63% 8,183 51%
Taxes and Fees 1,759 17% 8% 1,622 19%    
Non Tax revenue 1,401 13% 2% 1,378 16%    
Capital Income and Recoveries 180 2% (18%) 220 3%    
Total Non Oil and Gas 3,340 32% 4% 3,220 37% 2,761 (14%)
Total Revenues 10,580 100% 22% 8,640 100% 10,944 27%
Defense and Security 2,965 24% 0% 2,965 27% 2,885 (3%)
Oil and Gas 1,600 13% 105% 780 7% 1,767 127%
Civil Ministries 4,300 35% 6% 4,075 37% 4,320 6%
Loan Interest 1,294 11% 8% 1,200 11% 1,070 (11)%
Investments 900


0% 900 8% 1,100 22%
Supporting the electricity sector 500 4% 0% 810 7% 550 10%
Others (including provision for debt repayment) 571 5% 24% 150 1% 475 3%
Total Expenditures 12,130 100% 11% 10,880 100% 12,600 12%
Deficit (1,550)   (31%) (2,240)   (1,223) (45%)
Deficit funded by:              
Foreign Borrowing 305 20%   948 42%    
Local Borrowing 845 55%   692 31%    
Reserves 400 26%   600 27%    

*Source of information: Royal Decree 1/2022 and Ministry of Finance press release


Oman Budget 2022 (RD 1/2021)

The FY 2022 Oman budget represents the second year of the Tenth Five-Year Development Plan (2021-2025) (“the 10th FDP”), which paves the way to implement Oman Vision 2040 development objectives. The budget was prepared in context of similar themes to the previous year, in that financial and economic challenges resulting from the COVID-19 pandemic persist, and the Sultanate continues to be committed to the agreement of the Petroleum Exporting Countries (OPEC +) in limiting the production of oil to 1,055m barrels a day alongside ongoing economic and and geopolitical challenges. 

The Sultanate had good reason to be cautiously optimistic in preparing the 2022 budget, as 2021 afforded a number of positives that would have factored into the budget, such as:

  • the world economy slowly recovering from the initial impact of the Covid-19 pandemic, with the IMF projecting a medium-term global economic growth of 3.3% and forecasting Oman’s  GDP to grow around 2.5% in 2021 and about 3% average growth over the medium term;

  • Oman’s actual 2021 revenues exceeding budget, and therefore strengthening the Sultanate’s efforts to meet its Medium-Term Fiscal Plan (2020-2024) of reducing its deficit;

  • VAT and Excise Taxes “going live” in 2021, which allowed Oman to include a new revenue stream in the 2022 budget, and to begin reaping the benefits of implementing the new fiscal policies; and

  • the Sultanate’s credit outlook having improved across the three main agencies.

As such, while the 2022 General Budget is very much shaped by Oman’s Vision 2040 priorities such as achieving fiscal sustainability and reducing the ratio of the size of public debt to GD, it does so already having hit initial milestones under the short- and medium- terms plans underpinning Vision 2040.

2022 Budget Objectives

The State’s General Budget for 2022 is consistent with the objectives of the 10th FDP, as the general budget aims to achieve the following set of economic and social development goals:

1) Encouraging investment and pushing the private sector to lead and revitalise the economic sectors, and to expand partnership projects with the private sector.

2) Maintaining safe and sustainable levels of public spending through continued implementation of the medium-term financial plan initiatives.

3) Continuing efforts to maintain balanced financial stability and intensifying efforts to support and stimulate economic activity without prejudice to the sustainability of budget indicators and public debt.

4) Giving priority to the implementation of projects that serve the economic and social objectives related to the productive sectors, especially the sectors of economic diversification, and delaying the implementation of non-urgent projects, and giving great importance in return for the operation of projects that are completed during the year.

5) Providing the necessary incentives to encourage the establishment of private sector companies (especially public joint stocks companies) to serve development and provide the necessary opportunities for investment.

6) Continuing work to improve the credit rating of the Sultanate of Oman and increase investor confidence.

Oman’s 2022 budget was build on the basis of $50 per barrel and the Ministry of Finance confirmed that a precautious approach was taken once again in this regard. This is especially in consideration of the ongoing uncertainty of the oil price scene in light of the new Covid-19 variants, and the approaching date of the end of the OPEC+ agreement in April 2022. This is despite the estimates of the International Energy Agency, the International Monetary Fund and credit rating agencies (Fitch, Moody's, Standard & Poor's, and other global agencies) that put the average price during 2022 between $53 and $84.

Revenue is budgeted to increase by 23% to OMR 10.6 billion (FY21 OMR 8.6 billion), with oil and gas revenue representing c.68% (FY21 OMR 7.2 billion). The Ministry of Finance confirmed in a statement that, should revenues in excess of those budgeted at $50 per barrel be achieved, any excess will be utilised to further reduce the deficit and repay loans.

Oman Budget 2022 (RD 1/2022)

The Sultanate also foresees a rise in non-oil revenue to around OMR 3.3 billion in 2022, up 6% from around OMR 3.2 billion in 2021 budget. This continued growth in non-oil revenues supports Oman's objective of reducing its dependency on oil and gas revenues.

The  budget included higher revenues from local taxes & fees at OMR 1,759 million (FY21 OMR 1,622 million). VAT and Excise Tax are expected to contribute OMR 450 million and OMR 85 million of these revenues, respectively. Customs taxes are expected to contribute OMR 260 million in revenues.

The forecasted revenue from corporate tax is estimated at OMR 465 million (FY21 OMR 400 million) with an increase of 17% in comparison to taxes budgeted to be collected in year 2021. This is mainly due to an effective vaccine rollout and other containment measures have allowed the economy to open, while higher international oil prices have supported a broader recovery.  

One of the most important pillars of the Sultanate's general budget for 2022 is maintaining safe and sustainable levels of public spending, while continuing to raise non-oil revenue contributions, and giving priority to the implementation of projects related to the productive sectors and others. The Sultanate’s general budget 2022 aims to spend 40% of the total current spending on basic services, which will be distributed as follows: 17% on education, 7% on social security and welfare, 11% on health and 5% on housing.

Government expenditure, meanwhile, will rise to OMR 12.1 billion in the 2022 budget, up 11% from its 2021 estimates. Actual investment expenditures represents about 24% of total expenditure or OMR 2.9 billion. A total of 110 investment projects will be implemented and developed in 2021-2022, and it is expected that more projects are to come from the series of deals signed by a raft of state-owned and private Omani firms with Saudi Arabian companies during the visit by the Saudi Crown Prince His Royal Highness Mohammed bin Salman to the Sultanate.

In addition, the Government appears keen to outsource other services and projects to the private sector to further ease expenditure, with the aim of bringing improved efficiency and cost savings.

According to the estimates of the Ministry of Economy, it is expected that the total Gross Domestic Product “GDP” at current prices by the end of 2021 will reach about OMR 30 billion.

Further insights Oman Budget 2022

Oman’s 2022 budget estimates total revenues at OMR 10.6 billion, 3% less compared to actual revenues in 2021. Oil and gas revenues comprise 68% of this figure at OMR 7.2 billion, and the remaining OMR 3.3 billion is estimated from non-oil and gas revenues.


2022 Revenue estimates

2021 Revenue estimates

Revenue estimates are based on the following considerations:

  • Oil price assumed at $50 per barrel.

  • Oman’s commitment to cut oil production (i.e. 1.055m barrels/day) in line with OPEC’s decision to reduce production volumes. This commitment quota is effective for the period starting from May 2020 to April 2022.

  • Revenue generated from the estimated sale of gas as per consumption expected for the year 2022.

Actual revenue in 2021

The actual revenue realised in 2021 was OMR 10.9 billion, which represents c. 27% increase (OMR 2.3 billion) compared to the 2021 budget estimates of OMR 8.6 billion. This revenue increase can mainly be attributed to the following factors:

  • Oil Revenues: The uptick in oil and gas revenues as a result of both higher oil prices and higher oil production, in line with the ongoing Opec+ production restraint deal. Oman has seen its production ramp up in a stepwise manner since the middle of last year as the Opec+ group gradually restores all the oil it took off the market in May 2020 in response to the Covid-19-induced collapse in global oil demand.

  • Non-hydrocarbon Revenues: Total non-hydrocarbon revenues in 2021 were down by c. 14% compared to 2021 budget estimates (i.e. OMR 459 million). This mainly relates to the continued relief supplied by the government to the economy industries to help the businesses sustain the economic downturn caused by COVID-19. The relief measures continued to include waiving collection of taxes from tourism tax, municipality fees and taxes, rent due on factories operating in industrial areas, penalty fines on expired labor cards and the reduction of corporate income taxes,shipping and handling fees.


Total expenditure in FY22 is estimated at OMR 12.1 billion, an increase of OMR 1.3 billion (12% more) as compared to total expenditure projected in the 2021 budget. This increase in expenditure can be mainly attributed to the following considerations:

  • Expenditures of Government units, including periodical allowances and 2011 batch promotion costs.

  • Allocations for gas, electricity, water and transport expenditure, taking into account subsidy reform plans.

  • Cost of public debt service in accordance with the existing and planned loans over the year.


2022 Expenditure

2021 Expenditure

Actual expenditure in 2021

The actual expenditure in FY 2021 was OMR 12.2 billion, a 12% increase compared to the 2021 projection. This increase can mainly be attributed to the following:

  • Allocating funds to manage the outbreak of the COVID-19 pandemic.

  • Increasing capacity in higher education institutions to reach 31 thousand academic seats.

  • Covering the costs of recruitment and training programs associated with employment.

  • Payment of OMR 418 million for financial arrears for previous years.

  • Payment of OMR 1.2 billion for financial dues to private sector companies to the end of 2021

  • Allocating OMR 200 million for the costs involved in repairing the damages caused by the climatic conditions “Shaheen”.

  • Covering the government's contribution to the capital and operational expenses of the oil and gas sectors as a result of the delay in the operational procedures of the Energy Development Oman Company.


The 2022 budget estimates the deficit at OMR 1.5 billion. The table below illustrates the results of Oman’s efforts to gradually decrease its deficit since the 2016 peak.

All amounts in OMR (millions)

Deficit financing

74% of the 2022 budget deficit is expected to be covered by external and domestic borrowing while the remaining 26% will be covered by drawing on the reserves. This is in line with the Government's continued guidance to maintain the sovereign reserve funds and to rely upon borrowing to finance any deficit.

All amounts in OMR (millions)

The credit ratings for Oman remained unchanged in 2021 compared to 2020; however, each of the three main agencies improved their outlook for Oman in 2021: Standard & Poor from stable to positive, Fitch from negative to stable, and Moody’s from negative to stable. 

The following statement shows the development of the credit rating of the Sultanate issued by international rating agencies during the period (2014 - December 2021):

Credit Agency 2014 2015 2016 2017 2018 2019 2020 2021
Moody’s A1 A1 BAA1 BAA2 BAA3 BA1 BA3 BA3
Fitch - - - BBB- BB+ BB+ BB- BB-

Factors that prompted credit rating agencies to positively adjust their outlook for the rating of the Sultanate of Oman:

  • Financial control measures

  • Oil price hike

  • Reducing external financing pressures

  • Annual non-oil revenue growth

  • Expectations of a shrinking public budget deficit

  • Decrease in the public debt-to-GDP ratio

The Investment Authority plans to work on 110 local projects in 10 sectors next year, namely the energy sector, tourism, logistics, communications and information technology, food, fisheries, public services, mining and other sectors, with a total planned investment expenditure of OMR 2.9 billion.

Energy Sector

The investments of OIA in the energy sector focus on oil, gas and petrochemical projects, with approved investments with a budget of about OMR 1.4 billion. The sector's investments will be directed to four major projects, all of which will be completed or expanded without entering into new projects. The approved investment budget does not cover projects that have not yet reached a final investment decision, including green hydrogen projects. Noting that the investment allocations for the energy sector for the year 2022 will decrease by 12.5% from year 2021 budget. The OQ Energy Group, which is affiliated with the OIA, will direct the funds allocated to the energy sector to expand and enhance exploration and production operations and continue work on the Duqm Refinery, oil storage facilities at Ras Markaz, and the Salalah Ammonia Project.

Public Services Sector

The sector with the second highest share of investments is the public services sector, including electricity, water and waste management, with investments of OMR 802 million in 2022, with a slight increase in the budget compared to OMR 785 million in 2021. The sector will focus on building a new industrial waste treatment facility as a new project, in addition to continuing work on the ongoing plans to develop the infrastructure for waste management, landfills and transfer stations, and cover the ongoing cost of power generation under power purchase agreements, and the capital expenditures of the Electricity, Water and Wastewater Companies Group (Nama).

Tourism Sector

As for Omran Group, the government’s real estate and tourism development arm, the list of tourism projects that will be worked on includes 7 new projects starting in 2022 with allocated funding of OMR 193 million, compared to OMR 53 million in 2021, an increase equivalent to 257%. The group will develop: Yeti Sustainable City, Eastern Commercial District in Madinat Irfan, Port Sultan Qaboos Waterfront Project in Muttrah, Four Seasons Hotel Muscat, Souk Al Hafa, Al Sharq District Project and Diyar Ras Al Had Project.

Other allocations within the framework of the investment plan of the OIF for the year 2022 include financing the fourth production line of the Oman Cement Company, the industrial services projects of the Majis Services Company, and the expansion of the National Pharmaceutical Industries project.

Key developments during FY 2021

In 2021, the world continued to face a global health crisis with new COVID-19 variants, alongside fluctuations in oil prices during the year. These two factors continued to result in severe economic impact and business disruption worldwide, which is expected to take significant amount of time to recover. Like the vast majority of countries, Oman attempted to control the spread of COVID-19 by enforcing phased lockdowns, travel restrictions, and temporary closure of businesses, which in turn caused major slowdown of the economic growth.

Despite of the economic downturn caused by the pandemic, 2021 witnessed massive changes to the business, legal, and tax frameworks in the country, forming a continuation of development steps, set forth in the previous years, with the aim of achieving, among other objectives,  fiscal sustainability & economy diversification.

To read more on the summary of the key economic, tax and other development that were unfolded during the year 2021 click the button below.

Download full report

The takeaway

Over the past few years, the national economy passed through a succession of financial hurdles: The recession of international oil prices due to the decline of global demand, the rise of general debt to record levels, the pandemic of COVID-19, and the hike in the cost of borrowing—which all caused a collective negative impact on the Sultanate of Oman’s creditworthiness. Despite this, Oman’s economic good-news stories throughout 2021 demonstrate that the country is on track to achieving the 10th FDP deficit reduction objective. The 10th FDP’s budget objective is to achieve a budget surplus by 2025. As it stands, the 2021 preliminary results have come in ahead of the 10th FDP budget projection, and preliminary indicators of the budget this year point to the possibility of achieving the lowest deficit since 2014, despite oil prices fluctuation, and to again meet the 10th FDP budget objective for 2022.

Given that the 2022 General Budget was drafted with the 10th FDP and Oman Vision 2040 in mind, we can expect to see Government spending and fiscal policy that consistently align with the objectives of the two medium and long-term plans.

Maintaining spending on basic services like education, health, and social welfare figure high on the agenda of Budget 2022, noting that, in case oil prices rise higher than the endorsed rate, priority will be given to the use of financial returns to cut down the deficit and repay loans.

In addition, enhancing the contribution of recently introduced taxes will also be an area of focus for the Government, as implementation of these have created several tangible non-oil revenue streams. The introduction of personal income tax (“PIT”) is also on the horizon, following the Government’s announcement to include PIT within the scope of the 10th FDP. Albeit, this is not anticipated to be implemented prior to 2023.

Lastly, we also expect to see a lot of movement in the public sector and amongst SMEs, as the Government has published a number of projects it intends to undertake during the year as part of its digital transformation plans, fiscal performance improvement measures, and SME enhancement programmes.


Follow us