Budget measures set to determine market trend

28/12/2014 06:15 AST

Omani investors are keenly awaiting the forthcoming budget measures, which will determine the future trend on the local bourse. The Ministry of Finance will unveil the budget measures to the media, probably on January 4.

Market sources said that the general index, which recovered by a whopping 19 per cent within a fortnight from its lowest level of 5,417 on December 16, will move up further, if the government maintains its budget expenditure on infrastructure development.

Since a major chunk of the Sultanate's corporate sector depends on government spending for their business, maintaining expenditure for infrastructure development and diversification programmes at this year's level is vital.

"We have to wait for the budget, which will give more clarity (on government spending)," said Dhruwa Mitta, Head of Research, Shurooq Securities Co.

"A good budget will give some support to the market, which will also determine the economic activity in the country." Many experts expressed their doubts in the ability of Oman government to increase government expenditure in view of a 44 per cent fall in crude oil price this year to touch a low of $55 per barrel now.

Oman government raised its budget expenditure in 2014 budget by 5 per cent to an estimated at OMR13.5 billion, leaving an anticipated deficit of OMR1.8 billion for 2014.

There is no clarity on whether the government will accept certain proposals mooted by the Majlis Ashura, which include an increase in royalty paid by telecommunication service providers (from 7 per cent to 12 per cent), royalty paid by mining companies, imposing a fair tax on LNG exports and a tax on remittances by expatriates.

According to a rough estimate, it will generate revenue of OMR302 million. There were also proposals for reducing expenditure by 5 per cent. All these measures are aimed at enhancing revenue sources at a time oil income is coming down, added Kanaga Sundar, Head of Research at Gulf Baader Capital Markets.

Market analysts said that the government could have implemented the increase in natural gas to industries in a phased manner, rather than in one go.

Time of Oman