Oman is yet to decide whether to raise interest rates following last week’s rate hike by the US Federal Reserve, according to reports.
Times of Oman cited Hamood Sangour Al Zadjali, executive president of the Central Bank of Oman, as saying no decision had been taken to raise interest rates after the sultanate’s Gulf peers Saudi Arabia, the UAE, Kuwait, Bahrain and Qatar all raised rates last week.
“No decision has been taken so far,” he was quoted as saying.
“So far, the interest rates in the local market are relatively higher than rates prevailing in international markets. So it is still profitable for investors to invest in Omani rial deposits.”
High-ranking officials in the country also stressed that the rial’s peg to the US dollar was not under threat, according to the publication.
The 30-year peg came under pressure after the country’s current account plunged to a deficit of 10 per cent of GDP in 2015 and 2016 due to the fall in crude prices.
Ratings agency Moody’s predicted in a recent report that the country and its dollar-pegged Gulf peers could face difficulties as the US dollar strengthens.
However, it also stressed Oman could sustain its peg for nearly a decade so long as oil prices remain above $50 a barrel.
Fabio Scacciavillani, chief economist at Oman Investment Fund, dismissed claims the peg was under threat as “grossly overblown”, saying the central bank would be able to maintain it with its current OMR7.7bn of foreign assets.
“Furthermore, the Omani public sector holds conspicuous assets outside the central bank and has obtained foreign credit that can finance the current account deficit for the foreseeable future,” he was quoted as saying.