Oman inflation hits 18-year high

RECORD HIGH: Inflation in Oman rose to 11.11% in February, its highest level in 18 years. (Getty Images)

Inflation in Oman rose for a ninth month to 11.11% in February, the highest in at least 18 years, as food costs soared in the Gulf state that pegs its rial to the declining US dollar.

Food, beverage and tobacco costs, which account for almost a third of the consumer price index, surged 19.6% in February, the Ministry of National Economy said on its website on Sunday. Food costs had jumped 17% in January.

"There is no quick fix," Omani Economy Minister Ahmad bin Abdul-Nabi Mekki told newswire Reuters on Sunday.

"We took measures of reducing imports and we also requested wholesalers to reduce prices. Inflation will take its natural course in 2008."

Like other states in the world's biggest oil-exporting region, except Kuwait, Oman's dollar peg constrains its fight against inflation because it forces it to track US interest rate cuts designed to ward off recession.

In contrast, Gulf economies are surging on a five-fold increase on oil prices since 2002, fuelling price rises. The US dollar fell to record lows versus the euro this month.

Oman's consumer price index hit 120 points at the end of February, compared with 108 points a year earlier, the ministry said, the highest rise in Omani inflation since at least 1990.

Inflation in Oman, which hit 10.12% in January, had risen by an average of 1% in the last 10 years.

Rents rose 14.1% in February, down slightly from 14.3% in January, the data showed.

The Omani government should rein in fiscal spending to curb inflation, Central Bank Executive President Hamood Sangour Al-Zadjali told Reuters on Sunday.

"Oman needs to slow economic expansion, on money we spend on big projects," Al-Zadjali said on the sidelines of an investment conference in the Omani capital, Muscat.

A weaker Omani rial contributes to about a fifth of domestic inflation, Al-Zadjali said in February.

The Gulf state has no plans to change its dollar peg because the weak rial helped encourage trade and investment, he said last week.

To offset the impact of price rises on real wages, the sultanate's ruler ordered an increase of up to 43% in state workers' wages in February.

Oman expects the US dollar to recover this year, lifting the rial, its deputy central bank governor said earlier this month. (Reuters)

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Oman inflation hits 18-year high
Posted by Firozali A. Mulla MBA PhD, DUBAI, UAE on 13 April 2008 at 15:25 UAE time


Saleh al-Shaibany and Daliah Merzaban
Your comment In contrast, Gulf economies are surging on a five-fold increase on oil prices since 2002, fuelling price rises. The US dollar fell to record lows versus the euro this month.
Oman's consumer price index hit 120 points at the end of February, compared with 108 points a year earlier, the ministry said, the highest rise in Omani inflation since at least 1990.
My comment. THE CPI consumers’ price index over the world has gone up and I find this report for all purposes has been written very wrongly written. In 1999, the prices of many commodities were not that expensive, cheaper. Take Oman had the typhoon that was very sad; bad threw the entire budget off. How can you compare the Tsunami like place with the no storm places? Please check the statistics before you report the huge gap. The economics everywhere is, FOOD IS UP by 25%. Then if you look at the place where, agreed the dollar has given a slowdown. However, the typhoon really knocked out the economy of Oman. That was the real slow turn upwards.
I thank you
Firozali Mulla MBA PhD.

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