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Mon 11 Feb 2008 09:32 AM

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Oman inflation hits 16-year high

Skyrocketing food prices and rents set Gulf state's consumer price index soaring, ministry says.

Annual inflation in Oman, a Gulf oil producer that pegs its currency to the dollar, accelerated for a seventh straight month to 8.29% in December, its highest in at least 16 years due to rising food prices and rents.

The consumer price index climbed to 116.3 points on December 31, compared with 107.4 points a year earlier, the Ministry of National Economy said in a statement on Monday.

A rise in food, beverage and tobacco costs, which account for almost a third of the consumer price index, picked up to 14.4% from 12.6% the month before, the ministry said.

Rents rose 11.1% in the economy of almost $36 billion, steady against the rate of increase in November.

Like other Gulf states - except Kuwait - Oman's dollar peg forces it to track US monetary policy at a time when the Federal Reserve is slashing interest rates to ward off recession.

In contrast, Gulf economies are surging on a quadrupling of oil prices during the last six years, fuelling inflation.

A weaker Omani rial against currencies such as the euro contributes to about a fifth of domestic inflation, Oman's Central Bank Governor Hamood Sangour Al-Zadjali told newswire Reuters last week.

Average inflation in Oman could rise to 7% this year as growth in the non-oil economy accelerates and imports become more expensive, he said. Oil accounts for about half of gross domestic product.

Average inflation last year was 5.9%, according to the ministry, which revised its November figure upwards to 7.76% from 7.57%, and October to 7.4% from 6.84%. (Reuters)

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