Selected Issues Papers

Monetary Policy Transmission in Oman

Author/Editor:

Thomas Kroen

Publication Date:

June 13, 2024

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Amid a pegged exchange rate to the US dollar and an open capital account, Oman’s policy rates move closely with US monetary policy. In this analysis, we show empirically that transmission from policy rates into effective lending and deposit rates remains subdued in Oman, even compared to GCC peers that similarly face a high oil price environment with persistent excess liquidity in the banking system. A cap on personal loan rates and low exposure of banks to SMEs and riskier borrowers limit passthrough into effective lending rates and credit conditions. The note documents ongoing actions by Omani policymakers to strengthen transmission and provides further recommendations on liquidity management, reserve management, and relaxing the interest rate cap.

Series:

Selected Issues Paper No. 2024/018

Subject:

Asset and liability management Central bank policy rate Credit Deposit rates Excess liquidity Financial services Interest rate ceilings International organization Monetary policy Money

Frequency:

Regular