IMF urges Oman to act to arrest jobless rise

Sultanate should consider raising fees for work visas in bid to create jobs for nationals
IMF urges Oman to act to arrest jobless rise
Oman has been urged by the IMF to act to arrest rising unemployment among nationals (Photo for illustrative purposes only)
By Andy Sambidge
Sat 31 Dec 2011 10:22 AM

Oman should consider raising fees for work visas or instituting temporary subsidies for hiring and training in a bid to arrest rising unemployment among nationals, the International Monetary Fund (IMF) has said.

It said creating employment for the growing population was a "pressing challenge", adding that the jobless rate for Omani nationals reached more than 24 percent last year.

"While overall job growth has been strong, most new jobs have gone to foreign workers... To absorb new labour force entrants and significantly reduce unemployment, some 45,000 new positions for Omanis each year will be needed, twice the number achieved in the five years to 2010," a report by the IMF Mission to the Gulf sultanate said.

"To be sustainable, these new jobs will have to be in the private sector," the report added.

The IMF said recent policy actions have led to large increase in public sector employment, with 44,000 new government positions created in 2011 and the draft budget for 2012 including another 36,000.

"These measures have alleviated short term pressures stemming from high unemployment but do not address the underlying problems," the report said.

The IMF also said economic activity was accelerating, driven by new oil extraction technologies and increasing government spending.

Overall real GDP growth is projected to reach 5.5 percent in 2011 with 6.4 percent growth in the non-hydrocarbon sector.

"The economy has been largely unaffected by recent turmoil in international financial markets. While regional unrest has created additional uncertainty, Omani banks have little exposure to the Eurozone," the IMF added.

Real GDP growth is projected to edge down to 5 percent in 2012 while inflation is expected to remain moderate at an annual rate of about three-and-a-half percent.

It said the main risk to the medium term outlook is a prolonged drop in oil prices as higher government spending is raising the oil price that would be needed to balance the budget.

The IMF mission projects a breakeven price of $81 per barrel in 2012, rising to $105 by 2016.

It also called on the country to implement more economic diversification, away from oil.

"The non-hydrocarbon export industries, however, are highly energy intensive, have not generated many jobs, nor contributed much to government revenue," the report said.

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