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Dubai: Annual inflation in Oman accelerated to 6.47 per cent in August, the highest in 16 years, as food costs and rents jumped.
Oman is struggling to contain inflation because its central bank traditionally follows US interest rate policy to maintain the relative value of its dollar-pegged currency. The government considered measures including unshackling the rial currency from the tumbling US dollar and price caps to contain rising inflation but decided against such moves, the commerce minister said this week.
The consumer price index rose to 111.9 points on August 31, compared with 105.1 points a year earlier, data published on the Ministry of National Economy Web site showed. Inflation was 5.98 per cent in July.
The food, beverages and tobacco component of the index surged 12.1 per cent. Rents rose 7.5 per cent, the data showed.
The dollar peg was partly to blame for rising inflation because the US currency's decline was driving up the cost of imports, Commerce Minister Makboul Bin Ali Bin Sultan said in remarks published on Monday.
The dollar fell to a record low against a basket of six currencies this month. Rapid economic expansion, a construction boom, and the impact of record oil prices on transport costs were also to blame, Bin Sultan said.
Inflation is rising across the Gulf, where a quadrupling of oil prices in the past six years is driving rapid economic growth.
Saudi Arabia's king asked officials last week to explain rising inflation, which hit a seven-year high in August of 4.4 per cent from a year earlier.
In the UAE, the economy ministry took out newspaper advertisements this week to warn businesses against price hikes in the run-up to Eid. Inflation hit a 19-year high of 9.3 per cent in the UAE last year.
In May, Kuwait broke ranks with its neighbours and dropped its peg to the dollar, saying the US currency's decline was fuelling inflation.
Oman, one of the five Gulf oil producers that agreed with Kuwait to peg its currency to the dollar to prepare for monetary union, was committed to keeping the value of its rial unchanged, the central bank governor said last month.
But like Saudi Arabia and Bahrain, Oman held back from reducing interest rates to match the cut in the United States, saying domestic economic considerations took precedence when deciding monetary policy.
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