20 July 2015
MUSCAT: Oman's total subsidies will touch $7.27 billion or OMR2.82 billion this year, the International Monetary Fund (IMF) reported in a study.

Energy consumption in the country has been growing, which is driving the growth in subsidies.

This is against a subsidy estimate at $4.64 billion (or OMR1.8 billion) for 2015 in the state budget and an actual subsidy of $4.36 billion, or OMR1.69 billion, in 2014, which indicated a fall of 17.11 per cent over the previous year due to a plunge in oil prices. The Sultanate, which has a population of 4.23 million, will achieve a nominal gross domestic product of $81.64 billion in 2015, the IMF study noted.

The Oman government has been contemplating withdrawing fuel subsidies for the last few years, but no decision has been yet taken due to its far-reaching implications on the entire society. However, the Central Bank of Oman recently favoured a phased reduction in the government subsidy.

Oman's government grants subsidies to producers of various essential items, including petroleum products, housing loan interests, electricity, water and essential food items, including wheat flour.

Also, the government offers subsidies to oil firms, housing banks, power producers, flour mills and poultry feed manufacturers, while requesting that they sell their products and services at a government determined price in a move to help the public by controlling prices and inflationary pressures within the country.

Providing details of projected post-tax subsidies for various products and services, the IMF study said the subsidy on petroleum products, which constitutes 60.11 per cent, has reached $4.37 billion, while natural gas and electricity subsidies are estimated at $2.46 billion and $0.43 billion, respectively, for this year.

The IMF also noted that the Sultanate's subsidy, as a per cent of GDP, is estimated at 8.9 per cent - 5.36 per cent in the case of petroleum, 3.02 per cent for natural gas and 0.53 per cent for electricity.

As far as the per capita subsidy is concerned, the IMF reported that the country's total per capita subsidy is estimated at $1,718.97 - $1,034.52 for petroleum products, $582.32 for natural gas and $102.13 for electricity.

Of note, according to state budget estimates, the overall subsidy constitutes almost 13 per cent of budget expenditures, which is a growing concern for the government.

© Times of Oman 2015