MUSCAT: The sultanate will likely cut some subsidies in different sectors next year as it begins to feel the pressure of declining oil prices, said H E Darwish bin Ismail bin Ali al Balushi, Minister Responsible for Financial Affairs on Saturday. He was speaking to media personnel on the sidelines of a meeting of GCC finance ministers and central bank governors in Kuwait.

A Reuters report quoted him as saying, “Yes, I think the time is probable and especially with the decline in oil prices. I think the people would be more understanding now, more accepting. They realise that this was natural wealth that is being overused, wasted…” when asked whether subsidy cuts were likely next year.

He did not give details on which sectors would be affected. However, fuel subsidies have been described in the past as an obvious target.

The minister also said there was no plan to cut spending on major infrastructure projects at the moment, but it could be a possibility if oil prices declined further.

H E Balushi explained the current subsidy system was ineffective because it did not focus on poorer people. “Everybody gets it – people who deserve and people who do not. I think if we rationalise it and use the saving for better priorities, that will definitely have a return for the people of Oman.” Subsidy reforms will proceed gradually and make sure people who deserve state aid are not affected, he said.

The sultanate’s original budget plan for 2014 assumed the government would run a deficit taking into account an average oil price of US$85 a barrel. The oil price has been much higher for most of the year, but the last few weeks have seen it drop to as low as US$82.

H E Balushi also added that the government was planning to make its first issue of Islamic bonds for the domestic market. “Sukuk for the local market is I would say more clear at the moment, and we might be doing it during the first quarter of next year.”

A rial-denominated sukuk issue will likely be a boost for the fledgling Islamic finance industry and give Sharia’a-compliant banks a much-needed tool with which to manage their liquidity.

H E Balushi said spending in the 2015 budget plan would

be around the same level as

the 2014 budget or marginally higher. He said there was no plan to cut spending on the big infrastructure projects which Oman is investing in as part of its economic diversification plans.

“For years we have been growing at a relatively fast pace and I think we will slow down. But having said that, it is not our intention at the moment to cut expenditure where we would affect especially development projects for infrastructure,” he said.

“There is no intention unless if the trend with the oil price continues declining downwards. It is not clear at the moment if oil prices will sustain and at which level. We do not want to come up with a policy response that will create nothing but more confusion for our programmes. We want to do it gradually, in a steady manner.”