Oman had a currency board arrangement from 1970 when the first Omani currency was issued, but soon set up a central bank, whose focus was and to some extent remains on bank and financial sector supervision. Monetary policy involves a fix of the exchange rate to the USD with very narrow margins. Banks, financial markets and financial instruments have become more sophisticated over time, but the exchange rate continues to be fixed as before.

Years Targets and attainment Classification
1974 currency board on USD, Muscat Currency Authority (MCA) has no other role; several mainly foreign-owned commercial banks, with one UK bank acting for government and managing MCA pure currency board PCB
1975-2017 new central bank takes over from currency authority, currency pegged to USD with very narrow margins throughout, with typical transaction involving purchases of forex from central bank (which handles government’s foreign currency oil revenues) by commercial banks; central bank can lend to government, supervises growing banking system, and has initially limited role in monetary policy (via direct instruments, e.g. reserve requirements, interest rate ceilings); monetary growth dominated by government spending in excess of domestic (non-oil) revenues, in context of highly open economy, but fiscal policy mostly well controlled; from 1979 central bank uses forex swaps and rediscounts to affect banks’ liquidity; 1986 10% devaluation vs USD; Treasury bills issued from 1987, mainly held by banks, and development bonds from 1991, held more widely; small interbank money market from 1991, with repos from 1999; monetary authorities resist interest rate liberalisation until 1994, when ceilings on all rates except those for small-medium consumer loans ended; stock market boom 1996-8 fuelled by bank lending; 1998-99 some strengthening of money and bond markets; recurring problems with liquidity management; Oman initially committed to GCC monetary union process (scheduled for 2010 but later postponed) but late 2006 decides to withdraw, mainly because of its lack of real convergence with other members, but Oman will keep USD peg and participate in all other GCC integration; central bank remains focused on liquidity management, security markets remain limited and there are still no indirect monetary instruments

[Note: reports from 2016, 2017 and 2018 consultations not yet published, only IMF concluding statements available.]

augmented exchange rate fix AERF

Selected IMF references: Currency Arrangements and Banking Legislation in the  Arabian Peninsula, 1974; RED 1974 pp31-2, 41; RED 1976 pp30-31, 40; RED 1981 p19; RED 1985 pp24, 39; RED 1986 p45; RED 1988 p27; RED 1994 pp38-40; SR 1995 p11; SI 1997 pp68-69, 78-79, 81-4, 104, 113, 117; SR 1997 pp16-17; SR 1998 pp10, 20, 21-2; RED 1999 pp32-3; SR 2007 pp14-20; SR 2008 pp13-14; SR 2011 pp13-14, 17; SI 2011 pp18-27; SR 2012 pp19-20; SR 2013 pp18-20; SR 2015 p10, 14.

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