MUSCAT Oman's cabinet approved in principle spending cuts, tax rises and fuel subsidy reforms to cope with the damage to state finances from low oil prices, state news agency ONA reported on Wednesday.
"The council of ministers approved a number of procedures to face the impact of lower oil prices in order to ensure the sustainability of the financial situation of the state," ONA said.
"The most important of these actions include a reduction in government spending, and the development of non-oil revenues by raising tax rates on profits of corporations, reviewing and raising fees on some government services, and adjusting prices of petroleum products in line with global prices of these products starting from mid-January 2016."
Oman, a small oil exporter, has been hit hard by low oil prices; the government posted a budget deficit of 3.26 billion rials ($8.5 billion) in the first 10 months of this year, swinging from a 189.6 million rial surplus a year earlier.
ONA did not give details of the new fiscal measures but last week the Shura Council, a top advisory body to the government, voted to raise the 12 percent corporate tax rate to 15 percent. The Ministry of Finance is expected to release its 2016 budget as soon as next week.
Earlier this week oil exporting giant Saudi Arabia, Oman's northern neighbor, announced its biggest economic shake-up in more than a decade, including spending cuts, subsidy reforms and a drive to raise revenues from taxes and privatization.
Expensive state subsidies keep Omani gasoline and other fuel prices among the lowest in the world. Salim al-Aufi, undersecretary at the Ministry of Oil and Gas, told Reuters that the new fuel prices had not been set yet.
He said a committee involving several ministries would decide prices monthly, with the first announcement expected on Jan. 13. Current prices would be the floor, and the new pricing formula would take into account international levels as well as levels in the neighboring United Arab Emirates.
The new system "will not liberate prices completely, but they will be adjusted in a way where the end result is zero subsidy. Depending on international prices, the committee might choose to subsidize one product against the other," he said.
Oman and other Gulf states have been reluctant to cut fuel subsidies because that could be unpopular among the public and raise inflation.
"To mitigate some of the impact of these procedures, the General Authority for Consumer Protection has been ordered to monitor prices to ensure there are no unjustified increases that exceed the direct impact of these procedures," ONA said.
(Additional reporting by Hadeel Al Sayegh in Dubai; Writing by Andrew Torchia; editing by Dominic Evans)