Overview
The Central Bank of Oman manages monetary policy within the framework of a fixed exchange-rate peg to the United States dollar, a regime that has provided macroeconomic stability since 1986. Monetary policy operations focus on maintaining adequate foreign-exchange reserves, managing liquidity in the banking system, and ensuring price stability. The peg anchors inflation expectations and facilitates international trade and capital flows, which are critical for an open, oil-exporting economy.
Key Points
Interest rate decisions largely follow the US Federal Reserve to maintain the currency peg, though the Central Bank retains discretion over reserve requirements and lending ceilings. Repo and reverse-repo operations manage short-term liquidity, while standing facilities provide a corridor for interbank rates. The Central Bank has also strengthened its supervisory framework with Basel III capital-adequacy and liquidity-coverage requirements for domestic banks. Islamic banking regulations were updated to accommodate the growing demand for Sharia-compliant financial products.
Current Status
Foreign-exchange reserves remain comfortable at levels that cover several months of imports, reinforcing confidence in the peg. Inflation has remained moderate, supported by the anchor effect of the dollar peg and prudent fiscal management. The banking sector reports healthy capitalisation ratios, and non-performing loan levels have stabilised. Digital payment adoption has surged, prompting the Central Bank to explore a central bank digital currency feasibility study.
Vision 2040 Context
Vision 2040 recognises the importance of a stable monetary environment for attracting foreign direct investment and fostering private-sector growth. The Central Bank is expected to continue modernising its regulatory toolkit, expanding financial inclusion, and supporting fintech innovation while preserving the exchange-rate stability that has underpinned Oman’s economic development for four decades.