Read also: As Oman tightens its fiscal belt, people brace for challenging 2016
Muscat: Austerity will be a lifestyle choice for many in 2016, nationals and expatriates alike, say experts as Oman takes significant steps to get back on a firm financial footing.
That will mean, say commentators, that families must look at their spending, particularly on luxuries, as economic measures. Especially, the decision to deregulate the price of oil products could hit people’s pockets hard.
On Friday, Darwish bin Ismail Ali Al Balushi, Minister Responsible for Financial Affairs, said the government expenditures and revenues for 2016 are estimated at OMR11.9 billion and OMR8.6 billion, respectively, leading to an anticipated deficit of OMR3.3 billion.
And so the government has decided to deregulate the prices of petrol and diesel fuels, as part of the nation’s fiscal reforms.
“The most affected will be the common man, and he can be affected in several tangible ways. It will affect the socio-economic condition, and national savings will decrease significantly,” Dr Anchan C K, an economic expert and managing director at the World Wide Business House, told the Times of Oman.
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“The common man has to start planning as to how he can cope with his monthly expenditures, with limited wages and soaring prices of goods, especially the FMCG (fast moving consumer goods) products such as milk, pulses and vegetables etc. which are daily requirements. Thus, in the end, the common man has to compromise with his tastes and go in for less costly products and even cheap alternatives for certain products. Going out with family and friends will no longer be a satisfactory experience as the pinch on the purse far outweighs any culinary gratification one might aspire for,” Anchan added.
However, another economic expert said reducing fuel subsidies is a ‘good step’ which will not only help the government generate additional revenues but also promote appropriate consumption patterns among the people in Oman.
“People are keeping a lot of cars, especially the companies,” said Al Lawati, who asked to be identified by his last name.
“Therefore, introducing subsidy reforms will positively affect the economy as well as the environment and the situation on the ground,” he noted.
Ahmed Al Noamani, an Omani citizen, said the new budget may force him to abandon his gas-guzzling large car.
said, “It will greatly affect my family and I have to think of a new way to manage my family’s spending. Now, I am thinking of buying a small, fuel efficient car to go for work instead of my SUV.
Read here: Where Oman plans to spend its state budget in 2016?
“My question is: will the government regulate product prices or are we going to suffer the inflation this year? In my opinion, the government should seriously focus on tourism and stop unnecessary spending. They should also better their management skills and facilitate procedures for investments.”
In a move to shore up non-oil revenues, the state budget proposed a series of measures, including an increase in corporate income tax, to limit tax exemptions, to enhance the efficiency of tax collection mechanisms, to apply the new accounting system for calculating customs duty at all border posts, to amend the measures applied on exemption from customs duty and to collect fee on clearances and labour cards, to amend electricity and water tariff for commercial, industrial and government usage and to amend the fee disposal of real estate and municipality fee on rents.
Other measures to enhance non-oil income include amendment in fees charged for allocation of land (commercial, tourism, industrial and agricultural), unification of service fee of Muscat Municipality, Dhofar Municipality and other regional municipalities, to amend the fee for registration and renewal of vehicles and driving licence and to amend the fees for some services offered by the ministries and government units.
One economic expert, who did not want to be named, said due to cuts in budgetary spending, there will be less money in circulation.
“As a result, employers get lesser business which, in turn, affects their profitability. Obviously, when the top and bottom-line are hurt, employers will find many ways to cut costs. One can see in the budget as to how the government proposes to curb wasteful expenditure. This will have a cumulative effect on every other organisation which will explore ways to reduce their expenditure,” the expert said.
He also added that the proposed increase in fuel price by about 30 per cent will result in less money in the hands of common man.
“People will find ways to cut their expenditure to live within their income. While they may not significantly cut their daily expenditure, they may postpone expenditure on leisure such as travel and tourism. Similarly, there can be lesser spend on luxury products. I would assume that consumer and life style companies will think of giving more discounts to sustain their sales,” the expert added.