Oman to build two-year rice stockpile

Oman to build two-year rice stockpile

By Simeon Kerr in Dubai

Published: May 4 2008 16:47 | Last updated: May 4 2008 16:47

Oman is to buy 200,000 tons of rice, enough to build a two-year stockpile, as the Gulf state seeks to ease the inflationary burden on its population.

Makboul bin Ali bin Sultan, the commerce and industry minister, said the Gulf state would also buy 50,000 tons of wheat, Reuters reported, citing the Oman News Agency.

Oman, a modest oil exporter, is struggling with inflation levels of more than 10 per cent as global commodities shortages combine with the region’s oil-fuelled development boom to cause severe shortages. Five of the six Arab Gulf states, including Muscat, tie their currencies to the weakening dollar, pushing up the price of some imports.

Prices of food and drink rose 20 per cent in February, according to recent government figures. Mirroring its neighbours, rents are also spiking in the sultanate, up 14 per cent on the previous year.

“Some governments don’t want to be caught short and take a risk with rising social tensions,” said Abah Ofon, soft commodities analyst with Standard Chartered Bank in Dubai.

At market rates, Oman’s two-year stockpile would cost more than $200m. Saudi Arabia, the largest Arab Gulf state, is one of the world’s largest rice importers, buying more than 1m tons a year.

Other Gulf states have started to subsidise some staples to ease the impact of price increases on consumers, while the United Arab Emirates has said it is considering building a strategic food reserve to mitigate price increases.

Global rice prices have declined around 15 per cent from recent record highs over the past couple of weeks, Mr Ofon said, with expectations that prices will moderate over the next year as bumper wheat crops offset some rice demand.

Flush Gulf states have not faced the intensity of popular protest seen in some developing countries, but rising unrest among the large migrant labour populations, who form the backbone of the work force, has sparked concern.

The rising cost of living is also making it harder to attract and retain the middle-class workers vital for the diversification policies being pursued across the traditionally oil-dependent Gulf.