Oman plans to raise government spending by 9pct in 2012

Oman plans to increase government spending by 9 per cent in 2012 from this year to finance construction projects and create more jobs for nationals, a senior finance ministry official said on Tuesday.

The small non-Opec oil producer, which faced several public protests this year demanding more jobs and an end to graft, has said state expenditure this year will be 11 percent higher than originally budgeted for as the government has stepped up spending to try and ease social tensions.

"We see spending in 2012 going up by 9 per cent to about 8.9 billion rials ($23.1 billion) to finance infrastructure and raise more jobs for graduates," the official, who declined to be identified, told Reuters.

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

"We will try to keep the deficit at 850 million rials in 2012, the same as in 2011 with the expectations of higher total revenue due to a bigger oil production expected next year," the official said, but declined to reveal the 2012 revenue plan.

Fiscal policy is a key tool to steer the sultanate's hydrocarbon-reliant economy as it pegs its rial currency to the US dollar.

Besides higher oil production, greater fiscal spending is seen as one of the factors supporting Oman's economy this year at a time when growth in the West is stalling.

Spending was up 12.1 per cent at 3.9bn rials in the first half of 2011 from a year earlier, although the government was still able to book a surplus of 386.6m rials, or 1.7 per cent of GDP.

The sultanate was promised a $10bn aid package by its wealthier Gulf Arab neighbours earlier this year and it hoped a first $1bn tranche could arrive in 2012.

Before the sultan's spending package, Oman projected to spend 8.1bon rials in 2011 and book revenue of 7.3bn at a budgeted oil price of $58 per barrel.

The country, which sold its crude at an average price of $98.5 per barrel in January-June, targeted average daily production at 896,000 barrels this year.

Earlier this year, oil and gas ministry undersecretary Nasser al-Jashmi said that Oman was aiming to produce at least 900,000 barrels per day in 2012.

Oman is building three new airports and plans to upgrade its main airports in Muscat and Salalah, its second-largest city. It is also increasing power generation capacity by about 7 per cent.