Oman set to reform utility subsidies from January 2021

By Rahul Vaimal, Associate Editor
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Muscat Oman
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The government of Oman is all set to introduce changes to its expensive system of subsidies in January which will prioritize its poorest citizens while offering benefits on electricity and water. 

With the new plan along with various changes introduced towards labor laws, privatizations and a new tax regime, Oman will try to curb its already severe fiscal deficit situation which by International Monetary Fund forecast is expected to reach 10 percent of its economic output in 2020.

Over the last several years, the Sultanate has been going through a severe liquidity crunch and has been piling up debt leading to a below-investment-grade rating by all major credit rating agencies.

Under the new revision, electricity and water subsidies will only be provided to households that earn less than $3247.00 (1,250 Omani rials) every month. Families with income of fewer than $1299.00 (500 Omani rials) will continue to gain government support in utility bills, while subsidies for other income classes will depend on the number of family members.

Oman will begin enrolling eligible Omanis from this week with the revised subsidies coming into effect from January. It is still unclear whether foreign residents will also benefit from the new system.

The Sultanate is already conducting initial discussions with some Gulf countries to avail some form of financial support.

The country, which is one of the smallest producers of crude oil, has been severely hit by the low oil prices and the economic slowdown caused by the coronavirus outbreak.

Earlier, Oman’s new ruler Sultan Haitham bin Tariq al-Said approved a proposal to introduce value-added tax (VAT) in the country from next April to improve state revenues.