Muscat: Oman reduced subsidies on various food items such as rice, flour and sugar as well as fuel and other products by 173 million rials (Dh1,650 million) in the first quarter of 2015, according to a government report.
The latest report from the Ministry of Finance revealed that the total expenditure paid by the government for subsidies decreased by 47.9 per cent in the first three months of 2015 compared with the same period last year.
On the other hand, figures showed that the government spent more than 1.5 billion rials to benefit both citizens and expatriates regarding food and fuel products.
The 2014 report stated that petroleum product subsidies cost the government more than 1 billion rials.
Minister responsible for Financial Affairs, Darwish Al Balushi, recently stated that the Omani government is likely to start cutting fuel subsidies this year amid the slump in oil prices.
Al Balushi believes that people will be more understanding now as the natural resources are being overused. The move would come in light of low oil prices that are, according to Oman’s Minister of Oil and Gas, Mohammad Al Rohmi, costing Oman up to $55 million (Dh202 million) a day.
Al Balushi added that the current system of subsidies was ineffective because it did not focus on the poor.
An official at the Ministry of Finance told Gulf News that the subsidy would be cut gradually, ensuring that the needy will not be affected.
Oman’s budget deficit for 2015 is estimated to be 3.6 billion rials according to the International Monetary Fund (IMF), which is 13.2 per cent of the country’s gross domestic product (GDP).
Economic experts believe that the sharp decline in oil prices puts pressure on Oman to introduce economic reforms such as the cutting of energy subsidies.
Nasser Al Balushi, an economic expert, told Gulf News that it was time to reduce spending on subsidies, particularly energy subsidies as the price of oil has fallen by more than 20 per cent.
“With the slump in oil prices, I think it’s necessary to introduce gradual fuel subsidy cuts”, Al Balushi said.
Meanwhile, others believe that if the fuel subsidy is lifted it will hit low-income families that cannot afford to pay for the hike in the price of fuel, food and goods.
Salim Al Matroushi, a national with a low income, told Gulf News that he barely can afford to make ends meet for his family even under a system of subsidies.
“I hope that the country will take into consideration the conditions of low-income families, otherwise, we cannot survive”, he said.
Another resident, Jasem Al Maamari, said that the Omani government should increase the salaries for nationals to meet the hike in the oil and food prices.
Food, transport, taxi fares and commodity prices are expected to rise with the cutting of subsidies.
Last year the proposal for a two per cent levy on the billions of rials that expatriates send home every year was approved by Oman’s Majlis Al Shura, or the elected, lower house of the Council of Oman, to overcome a budget deficit due to a drop in oil prices. The government rejected the proposal.
Expatriates remit approximately 3 billion Omani rials every year, and a tax on the remittances is expected to bring in 62 million rials of revenue to the government.
Oman, a modest oil producer among Gulf Cooperation Council states with less than one million barrels a day, needs oil prices of more than $100 a barrel to balance its budget. The government had planned a budget deficit for 2014 on an assumed price of $85 a barrel.
