Oman is considering cutting its spending on energy subsidies as falling oil prices continue to put pressure on the sultanate’s budget, the Financial Times has reported.
Oman’s central bank governor, Hamood Al Zadjali, said the government was looking at reducing the amount of money it spends on subsidising the energy sector- a measure normally taken to keep prices below market levels for consumers and above the market average for producers.
“The government is considering it now. I think if oil prices continue to slide it will become even more necessary. But there are no plans to go ahead now,” said Al Zadjali on the sidelines of a conference in Dubai.
Al Zadjali also said Oman will try to compensate for the gap in its budget left by the falling oil prices by boosting its non-oil sectors. The sultanate will be focused on maintaining overall expenditure and development projects from now on.
Oil prices dropped below $86 per barrel on Tuesday, wich is almost a 20% decrease since last year. Industry experts say this is mainly due to the surging supply of shale oil from North America, combined with slowing demand in China, the world’s second biggest petroleum consumer.
This week the International Monetary Fund named Oman as one of three GCC states, alongside Saudi Arabia and Bahrain, which would face a budget deficit if oil prices remained at these levels with the same level of spending.
Oman, produces less than one million barrels of oil per day and it needs oil prices of more than $100 a barrel to balance its budget. The government of Oman had planned a budget deficit for 2014 on an assumed price of $85 a barrel.
