Sunday, Nov 22, 2015
Muscat: Oman has started major reforms in order to cut spending and increase revenues amid an oil price slump that has resulted in a significant rise in the country’s deficit.
Some of the measures have been carried out so far and others are on the way, said Naser Al Jashmi, undersecretary of the finance ministry.
The measures being studied by the cabinet include the levying of taxes on expatriate remittances, increasing taxes on real estate rent contracts, as well as raising electricity tariffs, traffic fines, vehicle registration, renewal and insurance fees. Among other options is reducing allowances for the government employees during official business trips.
With regard to employment, the government is expected to encourage the private sector to hire more Omani job seekers as well as shrink the number of jobs in bloated government bodies.
Government-financed projects that do not directly add to the economy are expected to be halted until the recovery from the slump in oil prices.
Al Jashmi added that the deficit of the state’s budget amounted to 2.7 billion riyals (Dh25.7 billion) until the end of the August.
Al Jashmi pointed out that oil contributes up to 75 per cent of state revenues and any drop in oil prices has a direct impact on revenues.
General budget
Observers believe that the ongoing slide in oil prices may continue and could severely affect the state’s general budget.
Ahmad Al Mashali, an economic expert, told Gulf News that if the oil prices continue to slump, the budget deficit could increase to an estimated 4 billion riyals by the end of this year.
Al Mashali stressed that controlling spending and increasing non-oil revenues are needed to avoid further budget deficits.
An official from the Ministry of Finance confirmed earlier to Gulf News that by the beginning of next year, the government will gradually cut fuel subsidies, adding that the reduction will be gradual in order to ensure that the public does not suffer from the move.
Subsidies on petroleum products, including petrol and diesel, are estimated to have cost Oman an estimated 900 million riyals (Dh8.56 billion) in 2015.
The sultanate is under pressure to pump more oil to make up for the drop in prices, such as it did when it increased daily production of crude oil and condensate oil last July. Production exceeded the barrier of one million barrels per day, the highest figure in the history of Oman’s oil production.
Oman and Bahrain are the most vulnerable Gulf countries due to a prolonged slump in the oil prices, according to Standard and Poor’s credit rating agency. The agency attributed this to the low fiscal reserves and lack of economic diversification.
By Fahad Al Mukrashi Correspondent
Gulf News 2015. All rights reserved.
