MUSCAT -- While figures quoted in the Budget show that government subsidy has hit extreme levels, the current method of offering subsidy is still not legalised and a large share of the support does not reach the target groups. This has prompted the government to revise subsidy, particularly backup for fuels and cooking gas. Work is under way at the Ministry of Finance and the Ministry of Oil and Gas to legalise government subsidy, and the results will be unveiled in two months. The study will be comprehensive as it will highlight the implications of subsidy and alternatives for compensating eligible groups.
Darwish bin Ismaeel al Balushi, Minister Responsible for Financial Affairs, said that the government is currently revising government subsidy, with emphasis on automobile fuel and diesel, noting that subsidy has to be directed to the target groups. He pointed out that the study on subsidy being undertaken by the Ministry of Finance and the Ministry of Oil and Gas takes about two months to finalise and that it will be comprehensive and inclusive of all implications on cases of lifting subsidy which costs the government a great deal of money without any certitude of the subsidy going to the target groups.
The study will also highlight alternatives for the post-subsidy period. Once the study is complete, it will be submitted to the Financial Resources Council for review and approval. Revision of fuel subsidy was among the recommendations of the International Monetary Fund (IMF), which stressed the need to cut down subsidy. The minister noted that the consumption of fuels is growing beyond natural levels and that subsidy allocations now stand at RO 1.3 billion, an extremely high figure. This cash (spent on subsidy) can be utilised by the government in other useful areas, including youth training or investment projects capable of generating new employment opportunities.
Economic experts and academicians have agreed that reform of the system of subsidy is a necessity of concern to any government but it requires a clear vision to be carried out within a specific timeframe. The IMF said in a report that scopes for the growth of the Omani economy are positive at the medium range, but this economy is still endangered by fluctuations in oil prices. Stability of financial conditions is a continuous challenge and the IMF recommends taking decisive steps, including reconsidering the big subsidy to fuel.
© Oman Daily Observer 2013
