IMF Staff Completes 2024 Article IV Mission to The Sultanate of Oman

IMF News, November 18, 2024

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IMF staff team led by Mr. César Serra conducted discussions in Muscat during October 30-November 13.
End-of-mission statement conveys preliminary findings; staff will prepare a report for the IMF's Executive Board subject to management approval.
The statement notes that views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

Economic growth:
- 1.2 percent in 2023.
- 1.9 percent (year on year) in the first half of 2024.
- Nonhydrocarbon sector growth: 1.8 percent in 2023 and 3.8 percent in the first half of 2024.
Inflation:
- 0.6 percent during January-September 2024.
- 0.9 percent in 2023.
Fiscal and external positions:
- Fiscal and current account balances remained in comfortable surpluses (no numerical values provided beyond "surpluses").
- Public sector debt declined further in 2023.
Credit rating:
- Oman’s sovereign credit rating has been upgraded recently to investment grade (as reported in the statement).

Growth outlook:
- Growth is projected to remain at 1.2 percent this year.
- Growth is set to rebound starting in 2025, supported by higher hydrocarbon production and continued acceleration of nonhydrocarbon growth.
Fiscal and current account balances:
- Expected to remain in surplus over the medium term, albeit somewhat lower than current levels as oil prices soften further.
Key uncertainties and risks:
- Oil price volatility.
- Risks of a global economic slowdown.
- Intensifying geopolitical tensions.

Nonhydrocarbon primary deficit:
- Poised to remain unchanged in 2024 relative to its 2023 level: 29 percent (as expected during the 2023 Article IV consultation).
Policy priorities and recommendations:
- Advance efforts to raise nonhydrocarbon revenues through:
- Steadfast implementation of tax administration reforms and tax policy measures.
- Phase out untargeted subsidies to free up resources for growth-enhancing investments supporting diversification.
- Strengthen fiscal institutions by:
- Enhancing public financial management.
- Rolling out a full-fledged medium-term fiscal framework.
- Adopting a fiscal rule.
- Developing a sovereign asset-liability management framework.
- Maintain prudent fiscal management while strengthening social safety nets.

Exchange rate and monetary policy:
- The exchange rate peg remains an appropriate and credible policy anchor for Oman.
- Steadfast implementation of the Monetary Policy Enhancement Project is recommended to ensure monetary policy actions effectively transmit to the broader economy.
Banking sector:
- Banking sector remains sound: profitability recovered to pre-pandemic levels; capital and liquidity buffers are ample; asset quality remains strong.
Financial sector development priorities:
- Further develop financial markets.
- Expand the institutional investor base.
- Leverage digitalization to enhance access to finance and support diversification efforts.
- Advance implementation of the financial sector development agenda to foster new funding opportunities for the private sector.

Oman Vision 2040 implementation:
- Reform implementation is progressing decisively.
- The new social protection law has been successfully rolled out.
- Labor market reforms are ongoing.
- Initiatives to improve the business environment, attract large-scale investments, and empower SMEs are underway.
- SOE reforms under Oman Investment Authority continue advancing.
Energy and digitalization:
- Efforts are ongoing to scale up renewable energy production to reduce electricity generation costs and support green hydrogen economy prospects.
- The digital transformation agenda is progressing.

The IMF staff team expressed appreciation to the Omani authorities and other counterparts for strong cooperation, candid discussions, and warm hospitality.

Press Release No. 24/424 — November 18, 2024, IMF Staff Completes 2024 Article IV Mission to The Sultanate of Oman