By Davide Barbuscia, Aziz El Yaakoubi and Lisa Barrington
DUBAI (Reuters) – Oman’s ruler has moved to overhaul the Gulf Arab state’s creaking finances since taking power this year but the coronavirus crisis is likely to delay deeper reforms needed to shore up the economy at a time of low oil prices.
Oman piled up debt at breakneck speed in the past few years, while plans to diversify the small oil producer’s economy and introduce sensitive tax and subsidies reform dragged under Sultan Qaboos who died in January after half a century in power.
New ruler Sultan Haitham has shaken up the government and state entities, and this week approved introducing value-added-tax in April in a sign to investors – ahead of an international bond sale – that he is open to reforms in a country that saw Arab Spring-like protests in 2011.
“This government has to take the tough decisions,” World Bank Gulf country director Issam Abousleiman said.
“If they don’t do anything over the next 3-4 years, and if the situation stays the same on the revenues and expenditures side, they will be forced to do it all at once, risking social backlash,” he said.
The 2011 protests over unemployment, corruption and political reform subsided after Qaboos sacked the government, created thousands of jobs and gave money to the unemployed.
Haitham cannot afford such largesse, and COVID-19 may limit his scope to diversify the oil-dependent economy and put it on a sustainable financial path, analysts and economists said.
A drop in revenue due to lower oil prices has prompted Oman to reduce spending, with major cuts in the first half of the year including investment expenditure.