Oman to start cutting utility subsidies in January

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Oman will start reforming its expensive system of subsidies in January by shifting the focus of its electricity and water spending to its poorest citizens, the government said on Sunday.

The plan, along with labor laws, privatizations and new taxation, is aimed at reducing a yawning fiscal deficit expected to come to 10 percent of economic output this year, according to an International Monetary Fund forecast.

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Oman has piled up debt over the past few years and is rated below investment-grade by all major credit ratings agencies.

The government said the new subsidy system for electricity and water will exclude households earning more than 1,250 rials ($3,260) a month.

Families with income of less than 500 rials will continue to receive government support in utility bills, the government media office said in a statement. For other classes, subsidies will depend on the number of family members.

The new plan will start running in January and eligible Omanis have to apply starting on Sunday.

It was unclear if foreign residents will also benefit from the new system.

Oman has also begun preliminary discussions with some Gulf countries about financial support.

Low oil prices and the economic slowdown caused by the coronavirus outbreak have strained the finances of Oman, a relatively small energy producer.

New ruler Sultan Haitham bin Tariq al-Said has shaken up the government and state entities, and in October approved introducing value-added tax from next April to boost state revenues.

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