Falling hydrocarbons proceeds and sustained spending boosted Oman’s state budget deficit by 200% y/y to OMR1.64bn ($4.29bn) in the first quarter of 2016, the statistics office reported.

Oman is set to record fiscal and current account deficits over the next four years, compared with surpluses in the previous four years on lower income and higher spending. The government has been selling Islamic and conventional bonds since 2015 to partially bridge the budget gap.

Total revenue shrank 41% y/y to OMR1.454bn in Q1, whereas spending dropped a marginal 1.9% y/y to OMR2.396bn, pausing serious concerns about the government efforts to rationalise expenditures. The bulk of spending went to public sectors salaries, outpacing by far capital spending.

Actual expenditures under settlement totalled OMR700mn at end-Q1, well up from OMR550mn a year earlier.

NOTE: Oman’s finance ministry is using the terminology “Actual expenditures under settlement” which sum is deducted from the total, or gross, budget surplus.

Net oil income dropped 48% y/y to OMR858mn in January-March, equalling to 59% of total state revenue. Gas proceeds also fell 28% y/y to OMR320mn over the period, reversing a long period of growth.

Current spending fell 4.1% y/y to OMR1.629bn in January-March 2016, accounting for 68% of the total. Capital spending climbed 20% y/y to OMR668mn amid government efforts to spur economic growth and the non-hydrocarbons sector.