Abstract
IMF Country Report No. 22/343
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IMF Country Report No. 22/343
OMAN
2022 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT
November 2022
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. In the context of the 2022 Article IV consultation with Oman, the following documents have been released and are included in this package:
A Press Release.
The Staff Report prepared by the staff team of the IMF for the Executive Board’s consideration on Lapse of Time basis, following discussions that ended on October 4, 2022, with the officials of Oman on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on October 24, 2022.
An Informational Annex prepared by the IMF staff.
The document listed below has been separately released.
Selected Issues
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2022 International Monetary Fund
Press Release
PR22/386
IMF Executive Board Concludes 2022 Article IV Consultation with Oman
FOR IMMEDIATE RELEASE
Washington, DC – November 15, 2021: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Oman and considered and endorsed the staff appraisal without a meeting.2
Strong vaccination efforts have allowed for the relaxation of all social distancing restrictions, and the economic recovery is gaining traction. Overall GDP growth rebounded from -3.2 percent in 2020 to 3.0 percent in 2021, and is projected at 4.3 percent in 2022, supported by increased hydrocarbon production and continued recovery of non-hydrocarbon economic activity. Rebounding economic activity and elevated global inflationary pressures are expected to push up average inflation to 3 percent in 2022. Direct spillovers on the Omani economy from the war in Ukraine have been limited.
High oil prices and fiscal consolidation under the authorities’ Medium-Term Fiscal Plan (MTFP), have improved fiscal and external balances considerably. The overall central government balance improved by 12.8 percentage points of GDP to a deficit of 3.2 percent in 2021, largely due to higher hydrocarbon revenue, expenditure restraint, and the introduction of VAT. Fiscal and external surpluses are expected in 2022 and over the medium term. Central government debt declined to 62.9 percent of GDP in 2021 and it is expected to decline to about 44 percent of GDP in 2022.
The banking system has weathered the recent shocks relatively well. Financial soundness indicators appear healthy, benefiting from prudent oversight of the Central Bank of Oman and the strong buffers before entering the crisis. However, private sector credit growth has remained subdued.
Uncertainties continue to cloud the outlook, with downside risks dominating in the short run. On the upside, the outlook could be bolstered by higher-than-expected hydrocarbon windfalls, accelerated implementation of structural reforms under Vision 2040, and the realization of investment projects from regional partners. On the downside, risks stem particularly from uncertainty about the war in Ukraine and its impact on the global economy and oil prices, a renewed flare-up of COVID-19 infections, tighter-than-expected global financial conditions, increased inflationary pressures from higher global food and energy prices, more persistent disruption in global supply chains, pressures to spend the hydrocarbon windfalls, and climate-related events.
Executive Board Assessment3
In concluding the 2022 Article IV consultation with Oman, Executive Directors endorsed the staff’s appraisal, as follows:
The economic recovery is gaining traction. Strong measures helped mitigate the health and socioeconomic impacts of the pandemic. Non-hydrocarbon growth is expected to strengthen over the medium term, supported by the oil price outlook, planned investments, and structural reforms. Fiscal and external buffers have increased, supported by increased hydrocarbon revenues and substantial fiscal consolidation. Nevertheless, downside risks, notably from global sources, dominate in the short run.
The authorities remain committed to fiscal consolidation notwithstanding oil revenue windfalls and social pressures. Significant fiscal adjustment is being implemented in 2022, which has allowed for increased social spending while still generating a substantial surplus due to the oil windfall. However, reinforcing fiscal sustainability over the medium term, as envisaged under the MTFP, and creating space for social safety net reforms and higher capital expenditure require additional measures. Thus, efforts to strengthen tax administration and implement a PIT are welcome. The phased withdrawal of untargeted energy and water subsidies should be a priority. Intensive public outreach is essential to sustain support for fiscal consolidation amid rising oil windfalls.
Establishing strong fiscal frameworks with clear objectives and a long-term anchor would help achieve fiscal sustainability. Fiscal frameworks would lay the foundation for adopting a fiscal rule. A rule based on the non-hydrocarbon structural primary balance, which is robust to hydrocarbon price volatility and economic fluctuations, could be appropriate. Ongoing reforms to improve public financial management and transparency are welcome and developing a sovereign asset and liability management framework should be a priority.
The exchange rate peg remains appropriate. The peg has provided a credible monetary anchor, helping to deliver low and stable inflation. Official foreign reserves, fiscal prudence, and structural reforms would continue to reinforce the peg. Better coordination between fiscal and monetary authorities, improved liquidity management, and deeper financial markets would improve the capacity for a more independent monetary policy.
Financial system risks are low, but the CBO should continue its close monitoring of bank asset quality and its efforts to strengthen regulatory frameworks. Restoring prudential rules to pre-pandemic levels should be a priority. Enacting the new Banking Law would align the legislation with international best practices. Careful coordination is needed to ensure that banking system liquidity remains adequate as plans to enhance the liquidity management framework and establish the TSA are implemented. Progress in developing capital markets is welcome.
Steadfast implementation of structural reforms under Vision 2040 is paramount to secure more inclusive, diversified, and sustainable growth. Strengthening the social safety net would help facilitate reforms to improve labor market flexibility. Advancing SOE reforms should also be prioritized to promote competition, strengthen governance, and stimulate private sector participation in the economy. To facilitate the digital economy transformation, worker skills will need to be upgraded. Pressing ahead with addressing climate challenges should be a priority.
Staff proposes that the next Article IV consultation with Oman follow the standard 12-month cycle.
Oman: Selected Economic Indicators, 2019–27
Includes crude oil, refining, natural gas, and LNG production.
Data prior to 2022 were adjusted by taking out expenditures on gas and oil that were hived off to Energy Development Oman in 2021.
Adjusted by the economic cycle.
Oman: Selected Economic Indicators, 2019–27
| Prel. | Proj. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
| Oil and Gas Sector | |||||||||||
| Total production of oil and gas (US$ billions) | 27.1 | 18.0 | 24.3 | 42.1 | 37.0 | 35.1 | 33.6 | 32.5 | 31.6 | ||
| Average crude oil export price (US$/barrel) | 63.6 | 46.0 | 64.3 | 95.0 | 85.5 | 80.2 | 76.2 | 73.3 | 71.0 | ||
| of Crude oil production (in millions barrels/day) | 0.97 | 0.95 | 0.97 | 1.06 | 1.13 | 1.13 | 1.13 | 1.14 | 1.14 | ||
| National Accounts | |||||||||||
| Nominal GDP (US$ billions) | 88.1 | 74.0 | 85.9 | 108.9 | 111.0 | 110.7 | 111.4 | 113.4 | 116.2 | ||
| Nominal GDP (in billions of Omani rials) | 33.9 | 28.4 | 33.0 | 41.9 | 42.7 | 42.6 | 42.8 | 43.6 | 44.7 | ||
| Real GDP | -1.1 | -3.2 | 3.0 | 4.3 | 4.1 | 1.9 | 2.3 | 2.5 | 2.7 | ||
| Real hydrocarbon GDP 1/ | -1.5 | -0.9 | 3.7 | 8.5 | 6.4 | 0.5 | 0.5 | 0.4 | 0.4 | ||
| Real nonhydrocarbon GDP | -0.9 | -4.5 | 1.8 | 2.6 | 2.6 | 2.9 | 3.4 | 3.9 | 4.0 | ||
| Consumer prices (average) | 0.1 | -0.9 | 1.5 | 3.0 | 2.5 | 2.2 | 2.0 | 2.0 | 2.0 | ||
| GDP Deflator | -2.7 | -13.2 | 12.7 | 21.6 | -2.1 | -2.1 | -1.6 | -0.8 | -0.2 | ||
| Investment and Saving | |||||||||||
| Gross capital formation | 26.9 | 28.3 | 23.0 | 23.2 | 23.5 | 23.8 | 24.0 | 24.1 | 24.2 | ||
| Public | 11.9 | 12.5 | 7.5 | 10.7 | 10.6 | 10.6 | 10.6 | 10.6 | 10.5 | ||
| Private | 17.1 | 19.9 | 18.8 | 12.5 | 12.9 | 13.2 | 13.4 | 13.5 | 13.7 | ||
| Gross national savings | 22.4 | 3.9 | 15.3 | 27.3 | 26.0 | 25.5 | 25.3 | 25.3 | 25.4 | ||
| Public | 8.8 | -0.1 | 7.0 | 15.5 | 11.7 | 12.0 | 10.9 | 9.9 | 9.3 | ||
| Private | 13.5 | 4.0 | 8.4 | 11.8 | 14.2 | 13.5 | 14.4 | 15.4 | 16.1 | ||
| Central Government Finances | |||||||||||
| Revenue and grants | 33.9 | 29.6 | 33.9 | 36.9 | 33.6 | 34.1 | 33.4 | 32.4 | 31.8 | ||
| Hydrocarbon | 25.8 | 22.3 | 26.6 | 30.5 | 27.1 | 26.8 | 25.8 | 24.5 | 23.8 | ||
| Nonhydrocarbon and grants | 8.1 | 7.4 | 7.3 | 6.5 | 6.6 | 7.3 | 7.6 | 7.9 | 8.0 | ||
| Expenditure | 38.8 | 45.7 | 37.1 | 31.7 | 32.0 | 31.6 | 31.8 | 31.3 | 30.8 | ||
| Current | 30.9 | 37.2 | 33.6 | 29.0 | 29.4 | 29.0 | 29.2 | 28.7 | 28.2 | ||
| Capital | 7.9 | 8.5 | 3.5 | 2.7 | 2.6 | 2.6 | 2.6 | 2.6 | 2.5 | ||
| Overall balance (Net lending/borrowing) | -4.8 | -16.1 | -3.2 | 5.3 | 1.6 | 2.5 | 1.6 | 1.1 | 1.0 | ||
| Overall balance (adjusted) 2/ | 0.3 | -9.9 | -0.9 | 5.3 | 1.6 | 2.5 | 1.6 | 1.1 | 1.0 | ||
| Non-hydrocarbon primary balance of (% non-hydrocarbon GDP) | -35.9 | -38.3 | -34.3 | -35.9 | -34.7 | -31.4 | -29.6 | -27.5 | -25.8 | ||
| Central government debt, of which: | 52.5 | 69.7 | 62.9 | 43.7 | 42.5 | 41.7 | 40.2 | 38.5 | 36.8 | ||
| External debt | 39.3 | 51.7 | 47.2 | 31.3 | 30.3 | 29.7 | 28.6 | 27.4 | 25.8 | ||
| Public debt, of which: | 79.1 | 111.0 | 107.6 | ||||||||
| SOEs debt | 26.7 | 41.3 | 41.8 | ||||||||
| Net financial assets | -11.2 | -28.5 | -25.5 | -13.7 | -12.5 | -10.9 | -9.0 | -7.3 | -5.6 | ||
| Monetary Sector | |||||||||||
| Net foreign assets | -3.6 | -28.4 | 31.2 | 13.1 | 25.8 | -3.8 | -10.9 | 1.0 | 2.8 | ||
| Net domestic assets | 4.4 | 23.4 | -1.4 | 2.8 | -4.1 | 6.0 | 8.9 | 4.6 | 4.6 | ||
| Credit to the private sector | 2.8 | 1.1 | 2.4 | 3.0 | 3.5 | 3.7 | 4.1 | 4.3 | 4.4 | ||
| Broad money | 2.0 | 8.9 | 4.6 | 5.2 | 3.3 | 3.0 | 3.3 | 3.7 | 4.2 | ||
| External Sector | |||||||||||
| Exports of goods | 38.7 | 33.5 | 44.6 | 64.0 | 59.3 | 58.2 | 57.6 | 57.5 | 57.7 | ||
| Oil and gas | 26.5 | 18.2 | 26.1 | 44.5 | 39.2 | 37.2 | 35.6 | 34.5 | 33.5 | ||
| Other | 12.2 | 15.3 | 18.5 | 19.5 | 20.0 | 21.0 | 22.0 | 23.0 | 24.2 | ||
| Imports of goods | -20.5 | -25.8 | -28.0 | -32.8 | -32.3 | -32.9 | -33.6 | -34.6 | -36.0 | ||
| Current account balance | -4.0 | -12.3 | -4.3 | 4.5 | 2.7 | 1.9 | 1.5 | 1.3 | 1.4 | ||
| Percent of GDP | -4.6 | -16.6 | -5.0 | 4.1 | 2.5 | 1.7 | 1.3 | 1.2 | 1.2 | ||
| Central Bank gross reserves | 16.7 | 15.0 | 19.7 | 21.6 | 25.5 | 25.1 | 23.7 | 24.2 | 25.1 | ||
| In months of next year’s imports of goods and services | 5.9 | 4.9 | 5.3 | 5.8 | 6.6 | 6.4 | 5.9 | 5.9 | 6.0 | ||
| Total external debt | 72.0 | 72.8 | 79.8 | 76.9 | 79.8 | 80.3 | 80.5 | 80.3 | 80.9 | ||
| Percent of GDP | 81.8 | 98.4 | 93.0 | 70.6 | 71.9 | 72.5 | 72.2 | 70.9 | 69.7 | ||
| Memorandum Items: | |||||||||||
| Non-hydrocarbon structural primary balance 3/ | -24.6 | -22.4 | -20.2 | -17.7 | -18.8 | -18.0 | -17.8 | -17.2 | -16.7 | ||
| Non-hydrocarbon structural primary balance (percent of non-hydrocarbon GDP) 3/ | -36.3 | -35.9 | -32.6 | -32.6 | -34.1 | -31.2 | -29.6 | -27.5 | -25.8 | ||
| Nominal effective exchange rate (2010=100) | 115.9 | 116.6 | 119.5 | … | … | … | … | … | … | ||
| Real effective exchange rate (2010 = 100) | 106.7 | 105.1 | 107.8 | … | … | … | … | … | … | ||
| Exchange rate (rial per dollar; period average) | 0.38 | 0.38 | 0.38 | … | … | … | … | … | … | ||
Includes crude oil, refining, natural gas, and LNG production.
Data prior to 2022 were adjusted by taking out expenditures on gas and oil that were hived off to Energy Development Oman in 2021.
Adjusted by the economic cycle.
Oman: Selected Economic Indicators, 2019–27
| Prel. | Proj. | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | |||
| Oil and Gas Sector | |||||||||||
| Total production of oil and gas (US$ billions) | 27.1 | 18.0 | 24.3 | 42.1 | 37.0 | 35.1 | 33.6 | 32.5 | 31.6 | ||
| Average crude oil export price (US$/barrel) | 63.6 | 46.0 | 64.3 | 95.0 | 85.5 | 80.2 | 76.2 | 73.3 | 71.0 | ||
| of Crude oil production (in millions barrels/day) | 0.97 | 0.95 | 0.97 | 1.06 | 1.13 | 1.13 | 1.13 | 1.14 | 1.14 | ||
| National Accounts | |||||||||||
| Nominal GDP (US$ billions) | 88.1 | 74.0 | 85.9 | 108.9 | 111.0 | 110.7 | 111.4 | 113.4 | 116.2 | ||
| Nominal GDP (in billions of Omani rials) | 33.9 | 28.4 | 33.0 | 41.9 | 42.7 | 42.6 | 42.8 | 43.6 | 44.7 | ||
| Real GDP | -1.1 | -3.2 | 3.0 | 4.3 | 4.1 | 1.9 | 2.3 | 2.5 | 2.7 | ||
| Real hydrocarbon GDP 1/ | -1.5 | -0.9 | 3.7 | 8.5 | 6.4 | 0.5 | 0.5 | 0.4 | 0.4 | ||
| Real nonhydrocarbon GDP | -0.9 | -4.5 | 1.8 | 2.6 | 2.6 | 2.9 | 3.4 | 3.9 | 4.0 | ||
| Consumer prices (average) | 0.1 | -0.9 | 1.5 | 3.0 | 2.5 | 2.2 | 2.0 | 2.0 | 2.0 | ||
| GDP Deflator | -2.7 | -13.2 | 12.7 | 21.6 | -2.1 | -2.1 | -1.6 | -0.8 | -0.2 | ||
| Investment and Saving | |||||||||||
| Gross capital formation | 26.9 | 28.3 | 23.0 | 23.2 | 23.5 | 23.8 | 24.0 | 24.1 | 24.2 | ||
| Public | 11.9 | 12.5 | 7.5 | 10.7 | 10.6 | 10.6 | 10.6 | 10.6 | 10.5 | ||
| Private | 17.1 | 19.9 | 18.8 | 12.5 | 12.9 | 13.2 | 13.4 | 13.5 | 13.7 | ||
| Gross national savings | 22.4 | 3.9 | 15.3 | 27.3 | 26.0 | 25.5 | 25.3 | 25.3 | 25.4 | ||
| Public | 8.8 | -0.1 | 7.0 | 15.5 | 11.7 | 12.0 | 10.9 | 9.9 | 9.3 | ||
| Private | 13.5 | 4.0 | 8.4 | 11.8 | 14.2 | 13.5 | 14.4 | 15.4 | 16.1 | ||
| Central Government Finances | |||||||||||
| Revenue and grants | 33.9 | 29.6 | 33.9 | 36.9 | 33.6 | 34.1 | 33.4 | 32.4 | 31.8 | ||
| Hydrocarbon | 25.8 | 22.3 | 26.6 | 30.5 | 27.1 | 26.8 | 25.8 | 24.5 | 23.8 | ||
| Nonhydrocarbon and grants | 8.1 | 7.4 | 7.3 | 6.5 | 6.6 | 7.3 | 7.6 | 7.9 | 8.0 | ||
| Expenditure | 38.8 | 45.7 | 37.1 | 31.7 | 32.0 | 31.6 | 31.8 | 31.3 | 30.8 | ||
| Current | 30.9 | 37.2 | 33.6 | 29.0 | 29.4 | 29.0 | 29.2 | 28.7 | 28.2 | ||
| Capital | 7.9 | 8.5 | 3.5 | 2.7 | 2.6 | 2.6 | 2.6 | 2.6 | 2.5 | ||
| Overall balance (Net lending/borrowing) | -4.8 | -16.1 | -3.2 | 5.3 | 1.6 | 2.5 | 1.6 | 1.1 | 1.0 | ||
| Overall balance (adjusted) 2/ | 0.3 | -9.9 | -0.9 | 5.3 | 1.6 | 2.5 | 1.6 | 1.1 | 1.0 | ||
| Non-hydrocarbon primary balance of (% non-hydrocarbon GDP) | -35.9 | -38.3 | -34.3 | -35.9 | -34.7 | -31.4 | -29.6 | -27.5 | -25.8 | ||
| Central government debt, of which: | 52.5 | 69.7 | 62.9 | 43.7 | 42.5 | 41.7 | 40.2 | 38.5 | 36.8 | ||
| External debt | 39.3 | 51.7 | 47.2 | 31.3 | 30.3 | 29.7 | 28.6 | 27.4 | 25.8 | ||
| Public debt, of which: | 79.1 | 111.0 | 107.6 | ||||||||
| SOEs debt | 26.7 | 41.3 | 41.8 | ||||||||
| Net financial assets | -11.2 | -28.5 | -25.5 | -13.7 | -12.5 | -10.9 | -9.0 | -7.3 | -5.6 | ||
| Monetary Sector | |||||||||||
| Net foreign assets | -3.6 | -28.4 | 31.2 | 13.1 | 25.8 | -3.8 | -10.9 | 1.0 | 2.8 | ||
| Net domestic assets | 4.4 | 23.4 | -1.4 | 2.8 | -4.1 | 6.0 | 8.9 | 4.6 | 4.6 | ||
| Credit to the private sector | 2.8 | 1.1 | 2.4 | 3.0 | 3.5 | 3.7 | 4.1 | 4.3 | 4.4 | ||
| Broad money | 2.0 | 8.9 | 4.6 | 5.2 | 3.3 | 3.0 | 3.3 | 3.7 | 4.2 | ||
| External Sector | |||||||||||
| Exports of goods | 38.7 | 33.5 | 44.6 | 64.0 | 59.3 | 58.2 | 57.6 | 57.5 | 57.7 | ||
| Oil and gas | 26.5 | 18.2 | 26.1 | 44.5 | 39.2 | 37.2 | 35.6 | 34.5 | 33.5 | ||
| Other | 12.2 | 15.3 | 18.5 | 19.5 | 20.0 | 21.0 | 22.0 | 23.0 | 24.2 | ||
| Imports of goods | -20.5 | -25.8 | -28.0 | -32.8 | -32.3 | -32.9 | -33.6 | -34.6 | -36.0 | ||
| Current account balance | -4.0 | -12.3 | -4.3 | 4.5 | 2.7 | 1.9 | 1.5 | 1.3 | 1.4 | ||
| Percent of GDP | -4.6 | -16.6 | -5.0 | 4.1 | 2.5 | 1.7 | 1.3 | 1.2 | 1.2 | ||
| Central Bank gross reserves | 16.7 | 15.0 | 19.7 | 21.6 | 25.5 | 25.1 | 23.7 | 24.2 | 25.1 | ||
| In months of next year’s imports of goods and services | 5.9 | 4.9 | 5.3 | 5.8 | 6.6 | 6.4 | 5.9 | 5.9 | 6.0 | ||
| Total external debt | 72.0 | 72.8 | 79.8 | 76.9 | 79.8 | 80.3 | 80.5 | 80.3 | 80.9 | ||
| Percent of GDP | 81.8 | 98.4 | 93.0 | 70.6 | 71.9 | 72.5 | 72.2 | 70.9 | 69.7 | ||
| Memorandum Items: | |||||||||||
| Non-hydrocarbon structural primary balance 3/ | -24.6 | -22.4 | -20.2 | -17.7 | -18.8 | -18.0 | -17.8 | -17.2 | -16.7 | ||
| Non-hydrocarbon structural primary balance (percent of non-hydrocarbon GDP) 3/ | -36.3 | -35.9 | -32.6 | -32.6 | -34.1 | -31.2 | -29.6 | -27.5 | -25.8 | ||
| Nominal effective exchange rate (2010=100) | 115.9 | 116.6 | 119.5 | … | … | … | … | … | … | ||
| Real effective exchange rate (2010 = 100) | 106.7 | 105.1 | 107.8 | … | … | … | … | … | … | ||
| Exchange rate (rial per dollar; period average) | 0.38 | 0.38 | 0.38 | … | … | … | … | … | … | ||
Includes crude oil, refining, natural gas, and LNG production.
Data prior to 2022 were adjusted by taking out expenditures on gas and oil that were hived off to Energy Development Oman in 2021.
Adjusted by the economic cycle.
Title page
OMAN
STAFF REPORT FOR THE 2022 ARTICLE IV CONSULTATION
October 24, 2022
KEY ISSUES
Context: Strong policy actions helped mitigate the fallout from the COVID-19 pandemic, and the economic recovery is gaining traction, supported by revival in the hydrocarbon sector and the relaxation of social restrictions. CPI inflation has been contained thus far, partly reflecting administered prices and caps on selected fuel prices. Fiscal and external buffers have increased, supported by higher hydrocarbon revenues and substantial fiscal adjustment under the authorities’ Medium-Term Fiscal Plan (MTFP). The authorities remain committed to fiscal consolidation notwithstanding oil revenue windfalls and social pressures. Financial soundness indicators appear healthy, benefiting from the strong buffers before entering the crisis and prudent central bank oversight. A broad range of structural reforms are being implemented under Oman Vision 2040. However, downside risks, notably from global sources, dominate in the short run.
Focus of the discussions: (i) strengthening fiscal frameworks; (ii) safeguarding financial stability; and (iii) securing more inclusive, diversified, and sustainable economic growth.
Key Policy Recommendations:
Fiscal policy: Reinforcing fiscal sustainability over the medium term, as envisaged under the MTFP, requires further revenue and expenditure measures. Tax administration should be strengthened; there is scope to increase VAT revenue over time; and the untargeted energy and water subsidies should be phased out while strengthening the social safety net. Establishing strong fiscal frameworks with clear objectives and a long-term anchor would support fiscal consolidation. Reforms to strengthen public financial management and transparency, and to develop a sovereign asset and liability management framework, should continue.
Monetary and financial policies: The exchange rate peg continues to serve Oman well. Efforts to strengthen the monetary transmission mechanism and establish the treasury single account should be carefully coordinated to maintain adequate banking system liquidity. Prudential rules should be restored to pre-pandemic levels as the impact of the pandemic declines. Close monitoring of banks’ asset quality remains essential.
Structural policy: Steadfast implementation of reforms under Vision 2040 is needed to foster strong, job-rich, private sector-led growth. This would require enhancing labor market flexibility, improving the business environment, advancing SOE reforms, leveraging digitalization, and tackling climate challenges.
Approved By
Zeine Zeidane (MCD) and Uma Ramakrishnan (SPR)
Discussions were held in Muscat during September 20 to October 4, 2022. The team comprised Daniel Kanda (head), Abdullah AlHassan, Haytem Troug, and Muayad Ismail (all MCD). Ms. Fei Liu (MCD) contributed to the report and the selected issues paper. Mmes. Dalia Aita and Esther George (all MCD) provided support from headquarters. Executive Director Mr. Mohieldin joined the concluding meetings. Advisor to the Executive Director Ms. Hamzah accompanied the mission. The mission met with Executive President of the Central Bank Al Amri, Secretary General of the Ministry of Finance Al-Jashmi, Executive President of Capital Market Authority Al Salmi, Members of the Economic and Financial Committee at Shuraa Council, other senior public sector and central bank officials, members of the civil society, and private sector representatives.
Contents
BACKGROUND
RECENT ECONOMIC DEVELOPMENTS
OUTLOOK AND RISKS
POLICY DISCUSSIONS
A. Fiscal Policy: Strengthening Fiscal Frameworks
B. Monetary and Financial Policies: Safeguarding Financial Sector Stability
C. Structural Reforms: Boosting Growth and Employment
STAFF APPRAISAL
BOX
1. Empowering Omani Women in the Labor Market
FIGURES
1. Recent Economic Developments
2. Fiscal Sector Developments
3. Monetary and Financial Developments
4. External Sector Developments
5. Banking Sector Soundness Indicators
6. Climate Change
TABLES
1. Selected Economic Indicators, 2019–27
2a. Government Finances, 2019–27 (Millions of rials)
2b. Government Finances, 2019–27 (Percent of GDP)
3. Monetary Survey, 2019–27
4. Balance of Payments Summary, 2019–27
5. Financial Soundness Indicators of the Banking Sector, 2016–22
ANNEXES
I. Status of Recommendations of 2021 Article IV Consultation
II. External Sector Assessment
III. Debt Sustainability Analysis
IV. Impact of the War in Ukraine
V. Risk Assessment Matrix
VI. Fiscal Risks
VII. Inflation Dynamics in Oman
VIII. The Impact of U.S. Monetary Policy Tightening on Oman
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.
