VZCZCXRO4732
RR RUEHDE RUEHDIR
DE RUEHMS #0123 0421204
ZNR UUUUU ZZH
R 111204Z FEB 08
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 9262
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MUSCAT 000123 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ARP, EED/IFD/OMA 
COMMERCE FOR ITA THOFFMAN 
TREASURY FOR OTA VALVO 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV MU
SUBJECT: SULTAN UNVEILS PRICE STABILIZATION PACKAGE 
 
REF: 07 MUSCAT 1037 
 
¶1. (U) On February 9, the Sultan announced a series of 
measures aimed at easing popular discontent over the rising 
cost of living and higher consumer prices.  Most importantly, 
the Sultan mandated an increase in public sector salaries 
based on grade status.  Those at the bottom of the pay scale 
will receive a salary increase of 43%, while mid-level grades 
will receive raises ranging from 7-12%.  Those at the higher 
end of the salary scale will receive a 5% bump, while 
stipends for government retirees will see a 10% increase over 
current levels.  In addition, the Sultan called for stronger 
monitoring of retailers for price gouging, reduced the cost 
of flour through government subsidy, requested immediate 
recommendations from the committee in charge of studying 
escalating rental prices, and established a direct line of 
authority between the Minister of Commerce and Industry and 
the Director of Consumer Protection. 
 
¶2. (SBU) In a conversation with Econoff, Salem bin Nasser 
al-Ismaily, Executive President of the Omani Center for 
Investment Promotion and Export Development, noted that the 
package did not address one of the fundamental causes of the 
price hikes, namely the government's continued commitment to 
maintaining the dollar peg.  "With the dollar declining 42% 
over the past couple of years, naturally prices are going to 
be more expensive for products imported from Europe and the 
UK."  He continued that with the strong inflow of oil revenue 
into Oman, having the Central Bank lower interest rates in 
step with the Federal Reserve would continue to exacerbate 
inflationary pressures.  "It's exactly the opposite of what 
we need," stated Ismaily.  "We really need to be encouraging 
savings." 
 
¶3. (U) Media outlets, however, complemented their reporting 
of the Sultan's initiatives with headlines such as, "Citizens 
rejoice after His Majesty orders to ease the cost of living," 
and widespread praise from the ministers of Commerce and 
Industry; Manpower; and Social Development.  Sayyid Ali bin 
Hamoud al-Busaidy, Minister of Diwan of Royal Court, noted to 
the media that, "The government has made great efforts to 
provide commodities, ensure control, and increase salaries." 
The media also carried a stern warning from Attorney General 
Hussain al-Hilali that price manipulators would be punished 
by up to two years in prison and a USD 1300 fine, along with 
reports that the Ministry of Commerce and Industry had 
launched raids on local bakeries.  Editorials applauded 
government actions to address the needs of the people through 
these measures. 
 
¶4. (SBU) Comment:  The much-publicized unveiling of the 
Sultan's price stabilization package is a clear indication of 
the government's intent to quell public discontent on this 
issue.  The fact that the Sultan himself was out in front on 
this announcement, vice the Minister of Commerce and 
Industry, also reflects concern within the government that 
the public increasingly viewed the Sultan as out of touch 
with the common Omani on the cost of living.  While the 
surprise announcement of a public-sector salary increase 
should allay criticism from a sizable contingent of 
disgruntled Omanis (the great majority of whom are on the 
government payroll), some of the other initiatives -- such as 
price monitoring and rental hike recommendations -- appear to 
be only a restatement of measures previously announced at the 
ministerial level.  End Comment. 
GRAPPO