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Sun 18 Dec 2011 06:13 PM

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Oman bases 2012 budget on $75 oil, says minister

Finance chief says government spending is set to increase by 12% next year

Oman bases 2012 budget on $75 oil, says minister
Omans Sultan Qaboos. the sultanate will base its 2012 budget on an oil price of $75 a barrel

Oman will base its 2012 budget on an oil price of $75 a barrel and government spending will increase by 12 percent next year, its finance minister said on Sunday.

"Running surplus depends on how the oil price will behave... We have based our budget on 75 dollars," Darwish al-Balushi told reporters on the sidelines of a Gulf Cooperation Council (GCC) summit in Saudi Arabia.

When asked about an increase of spending in 2012 over 2011, he said: "It's about 12 percent."

The Gulf Arab sultanate was hit by protests demanding jobs, higher salaries and an end to graft this year as unrest spread through the Arab world, making it boost expenditure well above the original plan.

Oman had originally projected a record expenditure of OR8.130bn ($21.11bn) for the 2011 budget, up 13.2 percent from the previous year.

A finance ministry official said last month Oman forecasts a fiscal deficit of 5.4 percent of gross domestic product (GDP) next year in its 2012 budget as the government plans to increase spending by 10 percent to create jobs.

In September, Balushi told Reuters government spending should rise to OR9.2bn this year.

The 2011 budget was estimated with an expected oil price of $58 per barrel, $8 more than in 2010.

Protests prompted Sultan Qaboos bin Said, a US ally who has ruled Oman for 40 years, to promise a $2.6bn spending package in April. He also announced plans to create 50,000 new jobs among other measures.

Balushi also said the small non-OPEC oil producer did not currently have plans for a sovereign bond issue: "We are not at this point of time thinking of tapping the international market for bonds."

Sources said in December Saudi Arabia was in talks with banks about issuing a riyal-denominated Islamic bond, or sukuk, as the kingdom abandons its aversion to sovereign-level debt to help build a local currency yield curve.

In November, Qatar raised $5bn with its first sovereign bond issue in two years.

Analysts polled by Reuters in September expected Oman's economy to expand by 4 percent in 2011 and 4.2 percent next year.