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 ratea6f tes 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