Oman’s financial system exhibited remarkable resilience: CBO report

Muscat: The Central Bank of Oman (CBO) released the eleventh issue of the Financial Stability Report (FSR). The FSR 2023 indicates that the “Omani financial system exhibited remarkable resilience to the heightened volatility and liquidity stress that permeated a large part of the global financial system.”

In addition, the FSR 2023 reaffirms that in Oman “the short-term risks to financial stability remain muted” and that the “Omani financial system remains strong and well-poised to support the economy.”

The FSR mentions that since Oman follows a fixed exchange rate regime, its policy rate is closely aligned with the US target federal funds range. As a result, Oman’s policy rate increased in tandem with the US Fed’s policy rate.

On the health of the banking sector, the report mentions that banks continued to hold ample capital buffers to “mitigate potential risks and withstand adverse economic conditions,” and “with the upturn in the economy, the profitability indicators for banks also improved.” The report also mentions that the “asset quality of the banking sector remains strong after the implementation of the exit strategy from loan deferment scheme.”

The report also states that the “banking system continued to maintain ample liquidity buffers and systemic liquidity remained adequate amid monetary policy tightening.”

The FSR also presented the results of the two annual surveys conducted by CBO “Systemic Risk Survey-2023” and the “Credit Conditions Survey-2023.” The systemic risk survey affirmed an improvement in confidence in the Omani financial system and the credit conditions survey illustrated that credit conditions in the Sultanate of Oman are expected to improve in 2023.

The report also recognizes the emergence of new challenges for financial stability, specifically in the areas of climate change and cybersecurity. To address these challenges, CBO is actively working on developing policies and frameworks that promote sustainable financial practices while ensuring the stability and security of the financial system.

The Composite Financial Stability Indicator (CFSI) of the Sultanate of Oman has revealed positive trends largely driven by favorable factors, particularly higher oil prices, improved debt sustainability and systemic risk indicators.

Moreover, FSRs are an important communication tool by Central Banks across the globe to disseminate information on potential points of distress for financial stability. In Oman, publications of FSR was made a part of the overall macro-financial surveillance system since 2013.