Country Report Oman April 2011

Economic policy: Allowances for state workers and price subsidies announced

The government announced the introduction of an allowance for public-sector employees to meet the rising cost of living, together with increased subsidies and price fixing for essential commodities. Low wages and high prices were two of the most frequently heard complaints of protesters during the recent demonstrations. In mid-March the sultan ordered that the monthly allowance be paid to all government employees, including the military. The allowance ranges from OR50 (US$130) for the highest-grade employees to OR100 for the lowest-grade ones. Government officials have claimed that the increased payments have been awarded with the explicit purpose of boosting domestic consumption, as opposed to merely caving in to protesters' demands. The Economist Intelligence Unit forecasts that average oil prices (Brent Blend) for 2011 will be US$101/barrel, but the 2011 budget was set using an assumed price of US$58/b, so for this year, at least, the government can afford the increase.

A week later the Council of Ministers (cabinet) announced that it was increasing subsidies on some commodities and fixing the price of others. No further details of the subsidies were announced. The government has been taking steps to improve Oman's food security and stabilise food prices since global food prices last increased dramatically in 2008. In early March the Ministry of Commerce and Industry signed an agreement with a Greek agro-engineering company, TAME, for the design and construction of wheat silos in Sohar and Salalah. Rashid al-Masruri, the ministry's food security chief, told an English-language newspaper, Muscat Daily, in January that Oman currently has a year's supply of rice. Mr Masruri said that the government was also increasing its capacity to store sugar and rice. Meanwhile, the Ministry of Agriculture and Fisheries instituted a seven-month export ban on five species of fish-hamour, tuna, kingfish, sole and emperor-starting on March 1st 2011. The ban is an attempt to ensure a good supply of fish to local markets at reasonable prices.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
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