Oman to remove utility subsidies from next month

Low income earners will still be eligible for assistance

A man walks on the Corniche in the Mutrah district in Muscat, the capital of the Sultanate of Oman. Silvia Razgova/The National

Oman's government will remove electricity and water subsidies for Omanis and residents from January 2021 as part of an effort to aid the sultanate's ailing economy.

The government will also end electricity and water subsidies for all government entities, private companies and industries.

The Ministry of Finance said there will be assistance for Omanis on low incomes, but those with an income of 1,250 rials ($3,247) a month and more must pay full rates.

"Omanis with lower incomes will continue paying the subsidised rate, as the government is still keen to maintain their quality of life without any interruption to their income, but there is no longer justification for higher earning individuals or companies and industries," the Ministry of Finance said on Sunday.

Lower income Omanis praised the government's exemption.

“We are very grateful for this decision. I don’t think I will be able to pay higher water and electricity bills, not from my income as a hotel security guard,” said Abdulkareem Al Siyabi, 43, who lives and works in Muscat.

“I have four children, and that means there is a total of six of us in the house.”

The government allocated $1.95 billion to water and electricity subsidies in the 2020 state budget.

The utility subsidy removal forms part of Oman’s efforts to cut spending and reduce state deficits as the economy struggles with low oil prices and the coronavirus pandemic. This year’s state deficit is estimated at 2.8 billion rials ($7.27 billion).

Oman also plans to charge income tax on high earners, Omanis and residents. If it goes ahead, the sultanate will be the first country in the Gulf to do so. It has announced plans to impose a 5 per cent value added tax from the second quarter of 2021.