MIL-OSI Economics: Monetary Policy Transmission in Oman

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Source: International Monetary Fund

Monetary Policy Transmission in Oman

Author/Editor:

Thomas Kroen

Publication Date:

June 13, 2024

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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:

Frequency:

Regular

English

Publication Date:

June 13, 2024

ISBN/ISSN:

9798400278358/2958-7875

Stock No:

SIPEA2024018

Format:

Paper

Pages:

9

MIL OSI Economics