Wednesday, February 28, 2007

the highs & lows of inflation in Oman

Back in the 20th Century, we were always happy and playful knowing that our country is one of the oil producers of the world; where the Middle East region produces a third of the world's oil production.

Time have changed however.

We no longer hear that our oil will still be there after 20 or 30 years time - even though some may claim so - but now the government is pushing the PDO to develop new petrol resources in order for it to keep it's budget running. But the inevitable shall happen; just look at how Bahrain has landed.

Fact is we gradually running out of resources financially and energy wise to keep our country running, but that hasn't stopped us from sinking into an inflation.

At first, the government denied ever - and still will, mind you - that our country has an inflation rate. At annual budget press releases it would account for 1% inflation. We have even heard of it even rising to 4% in the last 3 years.

But the staggering prices that has driven off the demand on products regardless of their nature has led to the questioning of whether this 'ill-transperency' strategy is getting the public anywhere. Everywhere we go, there is an outcry over how milk prices had risen because of no produce; then there was the issue of gas tanks being sold at a larger price other than the one quoted by the health and safety authorities. And we need not remind ourselves of how the price of land is increasing by the day to astronomical amounts, thus affecting rent prices for flats and villas by increasing them to the current rate of 30%.

And now, the latest addition to the victim's list is bread (a rise in 25%) and local cement bags (at a price of RO 1.800 instead of the government standard of RO 1.500).

Where does the list end? And if this the case to be from now on, how do the proper authorities expect the average citizen and resident to survive in the future with recent increase of private sector lowest income to be at RO 140?

The one thing I know about inflation is the in order to get things in order, the government will one day have to make the tough decision to cut down on public spending and start implementing more tax services. So, does this mean that this is an introduction to income tax just as the Minister of National Economy had stated that there will never be an introduction to such a tax in the Sultanate of Oman?

Too many contradictions.

But the one thing that I do know is that what is going currently does not bode well for any of us.

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Links:

- Inflation pushes up bread prices by 25pc

- Cement crisis worsens; price hits RO1.8/bag

3 comments:

Per Your Request said...

Maybe the higher prices of goods are due to the higher cost (wages) associated with producing these goods. In regards to land, well its simple, more people are now competing for a limited resource.
I think that Taxes should be implemented (once I get the chance Ill post on why)
Increase in omani businesses and FDI will help increase employment opportunities in the country.
also, I agree transperancy is an issue.

Sleepless In Muscat said...

Per Your Request:

The wages were raised due to the rise in product's prices.

And what's FDI?

Per Your Request said...

Sorry, Foreign Direct investment.
Yes, wages were increased initially to compensate for the price increase. However, given that productivity of employees hasn’t really changed, an increase in wages will just increase prices even further in the future. Thus, the purchasing power of the average person remains unchanged, or maybe even worse off.