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Sat 9 Feb 2008 05:55 PM

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Oman hikes salaries up to 43%

Sultanate's ruler orders rise in state workers' wages and wheat subsidy to curb impact of rising inflation.

Oman's ruler ordered on Saturday an increase of up to 43% in state workers' wages, and a wheat subsidy to curb the impact of rising inflation.

Sultan Qaboos bin Said also ordered a government committee to "put in place a tight mechanism to curb increases in rents", the official Omani News Agency (ONA) reported.

The wage rise takes effect this month, it said, adding that the wheat price subsidy was 25 rials ($64.95) a tonne.

Unable to raise interest rates due to their currencies' link to the weak US dollar, most Gulf Arab states are opting for subsidies and price controls to cushion their populations from soaring prices.

Exports of crude oil - priced in dollars - are the main revenue earner for most Gulf Arab states.

Annual inflation in Oman, an independent exporter of oil, grew to 7.57% in November, its highest in at least 16 years as rents and food prices rose.

Average annual inflation could rise to 7% this year, compared to 6.5% last year, as growth in the non-oil economy accelerates and imports become more expensive, the country's central bank governor has said.

Oman's move comes after neighbouring Saudi Arabia said in January it would raise public sector wages and pensions by 5% for three years and would subsidise half the cost of shipping and some administrative expenses.

Riyadh had also raised subsidies on some basic foods.

Inflation is climbing across the Gulf Arab region, which is reaping a windfall from a near five-fold increase in oil prices since 2002. (Reuters)

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