Oman’s state budget reported a OMR545mn ($1.41bn) deficit in the first quarter of the year, reversing a OMR215.4mn surplus the year before, on a sharp revenue contraction, amid falling oil income that largely offset a mild spending decline, the statistics office said in a preliminary estimate.

Total revenue plunged 24% y/y to OMR2.45bn in January-March while spending dropped 6% y/y to OMR2.44bn.

On May 25, Standard & Poor’s affirmed its A-/A-2 long- and short-term sovereign credit ratings on the Sultanate of Oman. The outlook is stable. S&P, however, warned that the recent drop in crude oil prices will have a significant impact on the fiscal and external positions of Oman, given its high dependence on oil. The ratings agency, thus, forecasts fiscal and current account deficits over the next four years, compared with surpluses in the previous four years. Lower oil prices will push Oman’s budget into a deficit of 5% of GDP this year, S&P projects.

Oman plans to sell sovereign bonds in 2015 to bridge the expected budget gap.

Net oil proceeds dropped 35% y/y to OMR1.673bn in Q1, equalling to 68.4% of total state proceeds. Gas revenue climbed 23% y/y to OMR446mn during the quarter.

The “Actual expenditures under settlement” under the finance ministry’s methodology increased to OMR550mn in Q1 from OMR400mn the year before.

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

Current spending edged up 0.3% y/y to OMR1.698bn in Q1 as a 9.8% annual rise in spending on civil ministries (higher salaries) was partially mitigated by a 25% y/y drop in spending on defence and national security.

Capital spending rose 2.3% y/y to OMR555mn in Q1.