Times of Oman
Oman slashes subsidies by more than OMR500 million in a single year
September 25, 2017 | 9:51 PM
by Times News Service
Experts welcomed the cuts as Oman is trying to diversify away from its dependence on oil.
 
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Muscat: Government spending on subsidies has been slashed by more than half a billion rials in a single year, according to the Ministry of Finance.

Subsidies to “oil products” alone were cut from OMR479.8 million to just OMR17.1 million between 2015 and 2016, according to the report, the final fiscal report for 2016.

Electricity subsidies were also down, from OMR386.4m to OMR278.8m, a saving of OMR108 million. Food subsidies also dropped, by OMR3 million, from 6.8 million to 3.8 million.

Analysts and residents welcomed the cuts. Oman is trying to diversify away from its dependence on oil after a global slump in oil prices. The knock-on effect of low oil prices has left the Sultanate with a budget deficit to tackle, and experts say it looks like austerity measures are working.



As a result of falling oil prices, the government decided last year to cut a number of subsidies including fuel to cope with the economic downturn, but Shura Council members also called for a safety net for those unable to afford higher fuel costs.

Government expenses and investments for 2016 reached OMR12.908 billion, according to the report, down from OMR13.968 billion in 2015.

Total subsidies dropped from OMR941m in 2015 to OMR366m in 2016, the report stated.

“The most significant dip in 2016 expenditure has been in fuel subsidies. The guidelines of this rationalising of the budget have been put in the Budget 2017 so it is only a matter of implementing it now,” said Fabio Scacciavillani, Chief Economist, Oman Investment Fund.

“Large expenditure rationalising hasn’t been as promising, now it is hard to pinpoint a certain sector and decrease expenditure. For additional austerity measures, we have to involve more areas and smaller amounts,” added Scacciavillani.

On the other hand, there has been a three per cent increase in subsidies on loans for development and housing.

“All of our programmes are being run without subsidies in mind because, in the future, you cannot keep having subsidies for so many people. If you want to have a competitive market, it is very important to remove subsidies, otherwise, people will never be motivated to work on their own,” said Saleh Al Shanfari, CEO, Oman Food Investment Company.

“Reducing government subsidies is a good step because providing people with subsidies is only the first step to helping people, and they need to learn to stand on their own two feet. The government cannot keep giving handouts to people because they cannot afford to be dependent on the authorities all their lives,” said T Bhaskaran, Convener, Indian Social Club Malayalam Wing

“If they stop subsidies, people will learn to save money and spend in a responsible manner, and they will understand the importance of spending only within their limits,” added Bhaskaran.

In April, Salim bin Nasser Al Aufi, undersecretary at the Ministry of Oil and Gas, said Oman’s cabinet will study a proposal to partially compensate poor families, who are unable to afford rising petrol prices after the government eliminated subsidies on petroleum products last year.

Operation (training) support was one of the areas which saw an increase last year, according to the report. Support rose over OMR25m from 44.2 million to 70 million.

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