Oman on Sunday said it will need to borrow money from local and international markets as it announced its budget for 2017 with a projected deficit of around $7.7 billion.

A finance ministry statement said the sultanate, which like other oil-producing Gulf states has been hit by a cash crunch because of a sharp drop in oil prices, will also follow a policy of austerity.

It estimated the deficit will be three billion riyals or 12 percent of the country's gross domestic product.

Oman will therefore seek to borrow locally and abroad to finance 84 percent of the deficit, as well as dig into its foreign reserves to cover the remaining 16 percent, the statement said.

It projected revenues of around 8.7 billion riyals while estimated that government spending in 2017 would be 11.7 billion riyals, two percent less than in 2016.

The government will earmark 23 percent of the budget to education, health, social services and sectors that "directly" impact people's daily lives, the statement said.

It warned that public sector job creations in 2017 will be "limited".

A total of 3.34 billion riyals is earmarked for defence and security.

Oman is a member of the six-nation Gulf Cooperation Council along with Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates, but is not a member of the oil-producing OPEC cartel.

But in November non-OPEC states, including Oman, agreed to cut their oil output, teaming up with OPEC in a bid to ease a saturated market and end a price slump that has affected many economies.

The sultanate derives 79 percent of its revenues from oil, of which it produces only about one million barrels per day (bpd).

The finance ministry said on Sunday that oil revenues in 2016 were down by 67 percent compared with 2014, when crude prices began plunging globally.

It also projected two percent growth this year, as oil prices recover.

Oman, like other GCC states, has adopted austerity measures, including imposing taxes on some goods like tobacco and alcohol, and stepping up privatisation of state-held firms, as it seeks to ease its dependence on oil revenues.

Source: AFP