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Wed 4 Jul 2012 05:36 PM

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Oman expects to erase $3.1bn budget deficit

Finance ministry official says higher than expected oil prices will help balance books

Oman expects to erase $3.1bn budget deficit

Oman expects to erase its OR1.2bn ($3.1bn) budget deficit projected for 2012 as oil prices have been higher than forecast, a finance ministry official said on Wednesday.

"Up to May, we have sold our oil 50 percent above the price we estimated for the 2012 budget, and that has pushed up revenues beyond our expectations," a finance ministry official in the budgeting department told Reuters.

"At this rate, we are comfortably going to wipe out the deficit," said the official, who did not want to be identified under briefing rules.

Oman sold its oil at an average price of $115 per barrel in the first five months of 2012 and the sultanate's revenue reached "a little over OR5bn" in that period, he said.

The non-OPEC oil exporter posted a budget surplus of OR1.5bn in January-April, data showed last month, which is equivalent to about 5.3 percent of its 2011 nominal gross domestic product, according to a Reuters calculation.

Analysts polled by Reuters in March expected Oman to post a fiscal surplus of 5.0 percent of GDP in 2012, up from 3.5 percent last year.

The price of Brent crude plunged $40 to as low as $88 per barrel between March and June but has since recovered to around $100. Oil accounts for around three-quarters of Oman's budget income.

Its 2012 budget plan is based on an oil price of $75 per barrel, with expenditure projected at OR10bn and revenue at OR8.8bn.

The International Monetary Fund forecast in December that Oman's budget break-even oil price would be $81 per barrel this year. But that level is expected to rise to $105 by 2016.

The Gulf Arab country, which faces a pressing challenge to create tens of thousands of jobs every year for its fast-growing population, boosted spending last year following public protests demanding more jobs and an end to corruption.