Oman Relaxes Loan Payments for Retirees to Ease Austerity Blow
Oman Relaxes Loan Payments for Retirees to Ease Austerity Blow
(Bloomberg) -- Oman is reducing the loan payments that banks can directly deduct from monthly pension checks after the Gulf nation pushed thousands of citizens into early retirement to reduce pressure on its troubled finances.
Banks will be able to deduct 30% from retirement checks of 1,500 rials ($3,896) or less, according to Oman’s government communications office. For those earning more than 1,500 rials a month, lenders can take out 35%.
Most Omani banks have direct access to borrower accounts to ensure repayment of loans. Lenders used to be able to deduct 50% of retirement income for personal credit and 60% for housing loans.
The measure is aimed at cushioning the blow for citizens forced into early retirement as Sultan Haitham Bin Tariq Al Said struggles to plug one of the Gulf’s widest budget shortfalls. In May, Oman’s government ordered state agencies, which employ most citizens, to force many into retirement.
Oman, one of the most vulnerable economies in the six-nation Gulf Cooperation Council, has adopted austerity measures that have included cuts to salaries for new civil servants and a plan to introduce a 5% value-added tax in April.
Banks can reach agreements with retirees as long as payments don’t exceed 50% of retirement income for personal loans and 60% of monthly checks for housing loans.
Lenders may additionally extend payment schedules for retirees aged up to 70, according to the circular. Banks can also deduct 25% to 35% of severance pay to cover debt as long as early payment charges aren’t levied.
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