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Oman Foreign Trade and the Balance of Payments
Oman's exports are dominated by oil earnings. Total
exports
peaked in 1985 at almost US$5.0 billion before the oil
price
collapse in 1986. During the preceding decade, exports
rose by a
factor of 3.5, largely because of the higher volume of
crude and
refined product sales overseas and the sustained rise in
international oil prices. Petroleum exports constituted 98
percent of foreign merchandise earnings in 1985. Exports
declined
to US$2.9 billion in 1986 but have steadily risen since
then as a
result of further increases in the volume of oil shipped
and
higher oil prices. In 1990 total exports rose to US$5.5
billion,
of which oil exports were just under US$5.2 billion (see
table 34, Appendix). Non-oil exports accounted for only 3.4
percent of
total exports in 1990, up from 2 percent in 1986. The bulk
of
non-oil exports includes livestock and some metals. Oman
also
made considerable strides in increasing textile and
mineral
exports during the early 1990s. Most exports go to other
Middle
Eastern countries, followed by Japan and other Asian
countries
(see
table 35, Appendix).
Domestic government expenditures and rising incomes
have
stimulated a steady increase in merchandise imports. Total
imports rose from US$907 million in 1975 to a peak of US$3
billion in 1985 before economic retrenchment and weaker
domestic
economic conditions caused a slight reduction in foreign
purchases. After falling to below US$2 billion in 1987,
the
improved oil revenue situation and the onset of the Fourth
FiveYear Development Plan raised imports to US$3.3 billion in
1991.
Development goods, notably machinery and transportation
equipment, and defense items dominate the imports profile.
In
1991 machinery and transportation items constituted 42
percent of
the total import bill, and other manufactured goods made
up 18
percent. Oman's total food imports fell in 1991 to 18
percent
from a mid-1980s average of 20 percent. Imports came
mostly from
other Middle Eastern countries and from Japan.
Despite the vagaries of international oil markets and
sharp
fluctuations in oil prices, Oman has succeeded in
maintaining a
surplus on its merchandise trade account, except in 1986.
A
deficit in the services account, however, continues to
constitute
a leakage in the government's external position. Workers'
remittances and payments on external debt account for more
than
one-half of the services deficit. Although the net outflow
from
workers' remittances slowed after the mid-1980s because of
the
recessionary climate in the region and the reduction in
the
number of foreign workers, the value of workers'
remittances
constituted just under US$1 billion per annum on the
balance of
payments. The program of indigenization was intended to
reduce
this leakage, but limited local manpower skills remain a
bottleneck for indigenization. Interest on the foreign
debt is
the second largest item of services imports. It peaked at
US$320
million in 1990 but declined in 1991 as a result of lower
international interest rates and some repayment of the
foreign
debt. Interest receipts on official and commercial bank
assets
abroad (totaling US$350 million in 1991) are insufficient
to
offset services outflows.
During the 1980s, Oman registered sizable surpluses on
its
current account. In 1981 the surplus reached just over
US$1
billion; it tapered off rapidly thereafter with the
decline in
oil prices. In 1986 Oman registered a deficit just over
US$1
billion on its current account, recovered to a US$784
million
surplus in 1987, a smaller deficit in 1988, and a surplus
in
1989. Higher oil prices in 1990 boosted the balance to a
record
US$1.2 billion surplus, but a rapid rise in imports and
some
weakening in external earnings left the current account in
balance in 1991.
Before 1986 the capital account was dominated by
increases in
external reserves. The cumulative increase in external
assets of
the government was US$2.5 billion between 1978 and 1985.
Despite
a shrinking surplus on the current account, the government
could
raise foreign assets because of a sizable program of
foreign
borrowing and direct foreign investment, mainly in the oil
sector. In 1986 the government had to reduce foreign
reserves by
US$612 million to fortify the capital account. This was
necessary
despite nearly US$765 million of loans secured on
international
markets. Since then, continued access to international
loan
markets and a steady rise in foreign direct investment,
not to
mention higher oil prices, have permitted the government
to
replenish foreign assets. At the end of 1991, the
government's
published foreign assets totaled US$1.6 billion; the
World Bank (see Glossary)
estimate of Oman's foreign debt at the end
of 1990 was US$2.5 billion.
Data as of January 1993
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