Doha has extended support to Muscat amid an ongoing economic crisis.
Oman has reportedly received $1 billion in direct financial support from Qatar in response to an economic crisis caused mainly by the coronavirus pandemic, the Financial Times reported on Wednesday.
Oman needs oil prices to average $105 a barrel to balance the fiscal deficit, which could widen to 16.9% of gross domestic product this year from a 7% deficit last year, according to the International Monetary Fund [IMF], the report said.
The IMF has also forecasted that Oman’s GDP would contract by 10% this year due to lower oil prices and the economic burdens of the coronavirus pandemic. With oil prices at least $40 a barrel, Oman faces a financial deficit of more than an estimated 18% of GDP this year.
The report also noted Oman has already introduced “revenue-raising and cost-cutting” measures to combat the economic turbulence, which includes introducing a 5% sales tax next year and plans for an income tax on high earners.
According to Bloomberg, Muscat reportedly opened discussions with neighbouring Gulf countries to obtain financial support to elevate its current economic crisis.
Meanwhile, Reuters reported that Oman has signed a one-year $2 billion bridge loan with a group of international and regional banks.
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Oman’s ties with Qatar have deepened since the Saudi-led blockade in 2017, with Muscat supporting Doha mainly through the provision of alternative trade routes.
In 2018, nearly eight months following the blockade, Qatar and Oman signed a memorandum of understanding on the development of investment and trade, which was described as a “solid relationship” between the allies.