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22 May 2024

Oman inflation dips despite food price rises

By Agencies


Annual inflation in Oman dipped below 7 per cent in October but stayed near September's 16-year high as food prices in the Gulf Arab state, which pegs its currency to the weak dollar, rose 12 per cent, government data showed.

Inflation was 6.84 per cent in the year to October, compared with 7.1 per cent in September, the Ministry of National Economy said on its website.

Food, beverage and tobacco prices, which account for almost a third of the index, gained 12 per cent over the 12 months, slowing slightly from 14 per cent in September.

The dollar's tumble to record lows against the euro and a basket of six major currencies in November has driven up Oman's import costs.

Some 5.2 per cent of Oman's imports in 2006 were from the United States, while 17.3 per cent were from Japan, 5.1 per cent from Germany, 5.3 per cent from India and 3.4 per cent from Britain, according to the 2006 Oman central bank annual report.

Commerce Minister Makboul bin Ali bin Sultan said in October that Oman had considered measures including unshackling its rial currency from the U.S. dollar and price caps to contain inflation but had decided against such moves.

Central Bank Executive President Hamood Sangour al-Zadjali said last month the country planned to keep its currency pegged to the dollar.

Dollar pegs force central banks in the world's biggest oil-exporting region to track U.S. monetary policy. The U.S. Federal Reserve has cut borrowing costs by 100 basis points since September 18, and most Gulf central banks have followed.

Domestic factors were also driving inflation, as rents - which account for 15 per cent of the index - climbed 8 per cent.

In September, Oman imposed a rent cap of 15 per cent for the next two years.

A Reuters poll last week forecast that the average rate of inflation in Oman would fall to 3.9 per cent in 2008 from 4.4 per cent this year. (Reuters)