OMAN: tackling the economic downturn

Dealing with diminishing oil revenues has presented Oman with an economic challnge

Dealing with diminishing oil revenues has presented Oman with an ongoing economic challenge

By Pat Lancaster

Oman is not blessed with the same vast oil and gas resources of some of its neighbours but through a long term policy of “good housekeeping” and wise leadership the sultanate enjoys an enviable position among its Gulf neighbours.  Over the past three or four decades, when some near neighbours veered towards hasty and frequently expensive decisions in the rush to achieve progress, Oman was obliged to weigh its options carefully. Because there was less money to go around, the country’s oil wealth had to be spent wisely. As one government minister explained to me in the late 1990s: “To some extent we learned  our most important lessons from observing the costly mistakes made by some of our neighbours.”

Despite an often problematic, frequently mountainous topography, there are excellent multi-lane highways linking the sultanate’s far-flung cities and towns, all of which boast a thoroughly modern infrastructure, set among buildings – including offices, private residences and mosques – whose architecture remains distinctly Omani in flavour.

Recently, seeking to bolster state finances, as the continuing low oil prices oblige the government  to slash its revenues, Oman has announced that it will raise electricity prices for selected users from the beginning of next year.

All government, commercial and industrial consumers of at least 150 megawatts per year will pay the higher tariffs, Qais Al-Zakwani, executive director of the Authority for Electricity Regulation, revealed. The move will impact upon around 10,000 of the country’s largest energy consumers. “These consumers represent only 1% of the current total of electricity consumers in Oman, but they account for 30% of the total supply of electricity,” Zakwani said.

In the rush to development Oman was obliged to take its time. One of the most positive aspects has been the way the country has maintained its unique identity

Despite decades of development, Oman  has maintained its unique identity

However, the same group of end users also account for around 20% of  annual government-sponsored subsidies for power generation; consequently the new tariffs are expected to save the state coffers OMR100m (around $260m) annually, Zakwani added.

The new prices will depend on the nature of consumers and will also be based on whether or not they consume electricity in high-peak or off-peak hours.

The conditions of use will be reviewed and, if necessary, revised annually in November. Zakwani confirmed that, at this stage, there are no plans to change tariffs for residential customers.

Since last year Oman has been cutting state subsidies and introducing other austerity measures to curb a budget deficit that totalled OMR4.02bn in the first seven months of 2016. By year’s end the deficit is expected to total OMR 3.3bn ($8.5bn), compared with a OMR 4.5bn deficit for the whole of 2015.

 

 

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