{
  "title": "Oman: Staff Concluding Statement of an IMF Staff Visit",
  "publication": "IMF News, February 12, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/02/11/mcs021221oman-staff-concluding-statement-of-an-imf-staff-visit",
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  "summary": "IMF mission led by Mr. Daniel Kanda conducted a virtual mission to Oman from January 17 to 31 to review economic developments, the outlook, and policies.",
  "publishDate": "2021-02-12",
  "sections": [
    {
      "heading": "Mission and scope",
      "content": "- IMF mission led by Mr. Daniel Kanda conducted a virtual mission to Oman from January 17 to 31 to review economic developments, the outlook, and policies.\n- Discussions focused on the impact of COVID-19 and related oil price shock, and policy priorities during the recovery phase and beyond.\n- Omani authorities indicated they will be favorable to the publication of future IMF reports."
    },
    {
      "heading": "Economic developments and impact of shocks",
      "content": "- Authorities responded rapidly in 2020 with closure of non-essential businesses, social distancing, border restrictions, increased health and medical support, and social assistance.\n- Fiscal and financial measures included interest-free emergency loans; waiving or reducing selected taxes and fees; flexibility to pay taxes in installments; establishment of the Job Security Fund; CBO easing through lower interest rates, liquidity injections, deferred loan installment payments, and relaxed macroprudential requirements.\n- Overall GDP contracted by 6.4 percent in 2020 (revised up from previous IMF forecast of -10 percent).\n- Non-hydrocarbon GDP estimated to have contracted by 10 percent in 2020.\n- Hydrocarbon GDP experienced a shallower decline due to strong oil condensate production not covered by OPEC+.\n- Sectoral impacts: construction, hospitality, and wholesale and retail trade were particularly hard-hit.\n- Inflation turned slightly negative owing to subdued demand.\n- Employment: a 15.7 percent reduction in expatriates helped relieve employment conditions; flexibility to negotiate temporary wage cuts also used."
    },
    {
      "heading": "External and fiscal positions (2020)",
      "content": "- Current account deficit estimated to have widened from 5.4 percent of GDP in 2019 to 10 percent in 2020, mostly owing to lower hydrocarbon exports.\n- International reserves declined slightly to around US$15 billion (6.5 months of imports).\n- Government hydrocarbon revenues fell by 3.4 percent of GDP.\n- Non-hydrocarbon revenues fell by 0.2 percent of GDP.\n- Fiscal deficit rose by 10.6 percentage points to 17.3 percent of GDP.\n- Central government debt rose to 81 percent of GDP, from 60 percent in 2019.\n- Financing of the deficit included external bond issuance, drawdown of deposits and sovereign funds, and privatization proceeds."
    },
    {
      "heading": "Policy measures announced by authorities",
      "content": "- Medium-term fiscal adjustment plan (Tawazun) targets elimination of the fiscal deficit over 2021-25 by boosting non-oil revenues while keeping nominal fiscal expenditures broadly constant.\n- Oman Investment Authority (OIA) established to strengthen governance and efficiency of public enterprises.\n- New holding company Energy Development of Oman (EDO) created to manage and finance government investments in oil, gas, and renewables."
    },
    {
      "heading": "Financial system soundness (as of December 2020)",
      "content": "- Banks’ capital adequacy ratios averaged 19.1 percent.\n- Liquidity Coverage Ratio around 200 percent.\n- Nonperforming loan ratios increased slightly to 4.2 percent.\n- Specific provisioning coverage of 63 percent and total coverage of 98 percent.\n- Profitability indicators declined due to COVID-19 impact, loan deferments, and risk provision charges."
    },
    {
      "heading": "Outlook and risks",
      "content": "- Modest recovery anticipated for 2021 with substantial uncertainty.\n- Projected mild recovery of 1.5 percent in non-oil GDP growth for 2021, rising to 4 percent by 2026 as drag from fiscal adjustment subsides.\n- Roll-out of vaccination and easing of social distancing would support activity; substantial medium-term fiscal consolidation would weigh on growth.\n- Upside risks: stronger rebound in global activity, confidence boost from successful fiscal adjustment implementation, successful strengthening of public enterprise governance.\n- Downside risks: emergence of COVID-19 variants prolonging pandemic impact and volatility in oil prices significantly affecting outlook and macro balances."
    },
    {
      "heading": "Policy considerations — priorities and sequencing",
      "content": "- Continue to prioritize combating the pandemic (including vaccine rollout), support recovery, minimize long-lasting economic scarring, and mitigate risks to financial stability.\n- Withdrawal of fiscal, monetary, and financial support should be carefully coordinated and calibrated to support hard-hit but viable sectors while reducing support where no longer needed.\n- With substantial fiscal adjustment planned for 2021, prioritize fiscal support measures (including social safety nets) and accommodate them by streamlining other spending rather than expanding the deficit.\n- Once recovery is established, financial policies should be increasingly targeted to reinforce fiscal and external sustainability, safeguard financial stability, and boost potential growth."
    },
    {
      "heading": "Reinforcing fiscal sustainability",
      "content": "- Key revenue measures in the Medium-Term Fiscal Balance Plan: (i) introducing VAT in 2021; (ii) a personal income tax on high-income earners being developed; and (iii) full-year impact of the expansion of the excise tax base in 2020.\n- Key expenditure measures: (i) containing the wage bill via civil service reforms; (ii) targeting energy subsidies to the most vulnerable groups; (iii) streamlining capital expenditure; and (iv) broad-based improvements in expenditure efficiency.\n- Sustained commitment and active outreach needed to build broad support for measures given impact on activity and household incomes.\n- IMF stands ready to provide technical assistance on establishing a sound medium term fiscal framework and a clear fiscal anchor.\n- 2021 budget envisages reducing the deficit (excluding oil condensate revenue and oil and gas related expenditure hived off to EDO) by about 6 percentage points of GDP to 7.5 percent.\n- Proposed expenditure measures include civil service reform (including obligatory retirement scheme for long serving employees and lower salaries for new hires) and a 5 percent cut of other expenditure.\n- Gross financing need projected at 14.5 percent of GDP, with the bulk expected to come from external sources."
    },
    {
      "heading": "Sovereign asset and liability management",
      "content": "- Explicit contingent liabilities of state-owned enterprises about 9.5 percent of GDP in 2019.\n- Recommendation to develop a sovereign asset and liability management framework to manage and coordinate sovereign assets and liabilities in an integrated way, detect and mitigate sovereign risk exposures, and adopt a medium-term debt strategy.\n- IMF technical assistance could support these efforts."
    },
    {
      "heading": "Safeguarding financial stability",
      "content": "- Banks entered the crisis from a position of strength but face headwinds from asset quality deterioration, a low oil environment, and high credit and deposit concentration.\n- Authorities’ stress test indicated domestic banks would remain above minimum capital adequacy under severe scenarios.\n- Deferred loan installment payments and associated risk classification could obscure asset quality deterioration; closely monitor emerging credit risks, especially for hard-hit sectors.\n- Case-by-case approach by banks to loan deferrals appears appropriate.\n- Timing of ending loan deferral policy should be carefully calibrated to support viable sectors without undermining banking system buffers.\n- At end-December 2020, deposits from government and government-related entities constituted around 28.3 percent of total deposits.\n- Banks’ claims on government and government-related entities increased from 10.3 percent to 19.1 percent of total assets during 2014-2020.\n- Strengthening the public sector balance sheet would help reduce public sector financing needs that may crowd out private sector lending."
    },
    {
      "heading": "Boosting potential growth and structural reforms",
      "content": "- Steadfast implementation of structural reforms aligned with Oman Vision 2040 is paramount to promote economic diversification and job creation for Omanis, and support fiscal and external sustainability.\n- Areas for reform: restructuring public administration; strengthening governance of state-owned enterprises; improving flexibility of labor markets; strengthening corporate restructuring mechanisms.\n- Well-designed social safety nets would support labor reallocation toward expanding sectors."
    },
    {
      "heading": "Selected economic indicators (estimates and projections from Table 1)",
      "content": "- Oil and gas sector:\n  - Total production of oil and gas (US$ billions): 26.3 (2019), 18.3 (2020), 20.7 (2021), 23.4 (2022), 23.3 (2023), 23.5 (2024)\n  - Average crude oil export price (US$/barrel): 63.6 (2019), 46.0 (2020), 55.1 (2021), 52.6 (2022), 51.2 (2023), 50.5 (2024), 50.1 (2025), 49.9 (2026)\n  - Crude oil production (in millions of barrels/day): 0.97 (2019), 0.95 (2020), 0.96 (2021), 1.11 (2022), 1.13 (2023), 1.14 (2024)\n- National accounts:\n  - Nominal GDP (US$ billions): 76.3 (2019), 63.2 (2020), 73.0 (2021), 77.1 (2022), 79.5 (2023), 81.8 (2024), 83.8 (2025), 86.4 (2026)\n  - Nominal GDP (in billions of Omani rials): 29.3 (2019), 24.3 (2020), 28.1 (2021), 29.6 (2022), 30.6 (2023), 31.5 (2024), 32.2 (2025), 33.2 (2026)\n  - Real GDP growth: -0.8 (2019), -6.4 (2020), 1.8 (2021), 7.4 (2022), 2.7 (2023), 2.2 (2024), 1.7 (2025), 2.0 (2026)\n  - Real hydrocarbon GDP: 1.4 (2019), -2.4 (2020), 12.6 (2021), 2.9 (2022), 1.5 (2023), 0.1 (2024)\n  - Real nonhydrocarbon GDP: -2.8 (2019), -10.0 (2020), 2.3 (2021), 2.4 (2022), 3.0 (2023), 3.4 (2024), 4.0 (2025)\n  - Consumer prices (average): -0.9 (2019), 3.9 (2020), 2.5 (2021), 2.8 (2022), 1.0 (2023), 0.9 (2024)\n  - GDP Deflator: -3.5 (2019), -11.6 (2020), 13.6 (2021), -1.7 (2022), 0.4 (2023), 0.7 (2024), 0.8 (2025)\n- Central government finances:\n  - Revenue and grants: 38.1 (2019), 34.3 (2020), 33.3 (2021), 35.5 (2022), 35.7 (2023), 36.3 (2024), 35.9 (2025), 35.6 (2026)\n  - Hydrocarbon revenue: 30.1 (2019), 26.7 (2020), 22.4 (2021), 23.8 (2022), 23.2 (2023), 22.8 (2024), 22.3 (2025)\n  - Nonhydrocarbon and grants: 7.9 (2019), 7.7 (2020), 10.8 (2021), 11.7 (2022), 12.5 (2023), 13.0 (2024), 13.1 (2025), 13.3 (2026)\n  - Expenditure: 44.1 (2019), 51.6 (2020), 38.6 (2021), 37.6 (2022), 37.4 (2023), 36.4 (2024), 35.3 (2025), 34.8 (2026)\n  - Current expenditure: 41.8 (2019), 34.6 (2020), 34.4 (2021), 33.6 (2022), 32.5 (2023), 31.9 (2024)\n  - Capital expenditure: 8.4 (2019), 9.8 (2020), 3.2 (2021)\n  - Overall balance (Net lending/borrowing): -6.7 (2019), -17.3 (2020), -5.4 (2021), -2.1 (2022), -0.1 (2023), 0.6 (2024)\n  - Overall balance (adjusted): -3.4 (2019), -13.4 (2020)\n  - Total government debt, of which: 60.0 (2019), 81.1 (2020), 72.7 (2021), 69.6 (2022), 68.1 (2023), 65.5 (2024), 62.6 (2025), 59.9 (2026)\n  - External debt: 42.5 (2019), 57.2 (2020), 51.3 (2021), 46.3 (2022), 42.4 (2023), 37.1 (2024), 32.3 (2025), 29.5 (2026)\n- Monetary sector:\n  - Net foreign assets: -3.6 (2019), -28.3 (2020), -2.0 (2021), -1.9 (2022), -2.2 (2023), -1.8 (2024)\n  - Net domestic assets: 4.4 (2019), 9.6 (2020), 8.1 (2021), 6.3 (2022), 4.7 (2023)\n  - Credit to the private sector: 1.1 (2019), 4.5 (2020), 3.6 (2021), 3.5 (2022)\n  - Broad money: 8.9 (2019), 7.5 (2020), 6.0 (2021), 5.1 (2022), 3.8 (2023)\n- External sector:\n  - Exports of goods: 38.7 (2019), 31.1 (2020), 34.2 (2021), 38.4 (2022), 39.2 (2023), 40.7 (2024), 41.9 (2025), 43.1 (2026)\n  - Oil and gas exports: 26.5 (2019), 19.6 (2020), 21.5 (2021), 24.5 (2022), 24.1 (2023), 24.2 (2024)\n  - Other exports: 12.2 (2019), 11.5 (2020), 12.7 (2021), 13.9 (2022), 15.1 (2023), 16.2 (2024), 17.5 (2025), 18.9 (2026)\n  - Imports of goods: -20.5 (2019), -18.3 (2020), -19.8 (2021), -21.5 (2022), -22.6 (2023), -23.8 (2024), -25.0 (2025), -26.5 (2026)\n  - Current account balance: -4.1 (2019), -6.3 (2020), -4.3 (2021), -3.9 (2022), -3.1 (2023), -3.0 (2024)\n  - Central Bank gross reserves (in months of next year's imports of goods and services): 8.2 (2019), 6.5 (2020), 5.8 (2021), 5.5 (2022), 5.2 (2023), 5.0 (2024)\n  - Total external debt: 82.2 (2019), 85.6 (2020), 85.4 (2021), 84.6 (2022), 82.1 (2023), 79.8 (2024), 79.3 (2025), 100.0 (2026), 130.1 (additional series), 117.2, 110.8, 106.4, 100.4, 95.2, 91.8 (series as presented)\n\nSource: Oman: Staff Concluding Statement of an IMF Staff Visit, February 12, 2021.\n\n---\n\n\n References\n\n- Oman and the IMF\n- Mission Concluding Statements\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/02/11/mcs021221oman-staff-concluding-statement-of-an-imf-staff-visit"
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    "Published: February 12, 2021",
    "IMF mission led by Mr. Daniel Kanda conducted a virtual mission to Oman from January 17 to 31 to review economic developments, the outlook, and policies.",
    "Discussions focused on the impact of COVID-19 and related oil price shock, and policy priorities during the recovery phase and beyond.",
    "Omani authorities indicated they will be favorable to the publication of future IMF reports.",
    "Authorities responded rapidly in 2020 with closure of non-essential businesses, social distancing, border restrictions, increased health and medical support, and social assistance.",
    "Fiscal and financial measures included interest-free emergency loans; waiving or reducing selected taxes and fees; flexibility to pay taxes in installments; establishment of the Job Security Fund; CBO easing through lower interest rates, liquidity injections, deferred loan installment payments, and relaxed macroprudential requirements.",
    "Overall GDP contracted by 6.4 percent in 2020 (revised up from previous IMF forecast of -10 percent).",
    "Non-hydrocarbon GDP estimated to have contracted by 10 percent in 2020.",
    "Hydrocarbon GDP experienced a shallower decline due to strong oil condensate production not covered by OPEC+.",
    "Sectoral impacts: construction, hospitality, and wholesale and retail trade were particularly hard-hit.",
    "Inflation turned slightly negative owing to subdued demand.",
    "Employment: a 15.7 percent reduction in expatriates helped relieve employment conditions; flexibility to negotiate temporary wage cuts also used.",
    "Current account deficit estimated to have widened from 5.4 percent of GDP in 2019 to 10 percent in 2020, mostly owing to lower hydrocarbon exports.",
    "International reserves declined slightly to around US$15 billion (6.5 months of imports).",
    "Government hydrocarbon revenues fell by 3.4 percent of GDP.",
    "Non-hydrocarbon revenues fell by 0.2 percent of GDP.",
    "Fiscal deficit rose by 10.6 percentage points to 17.3 percent of GDP.",
    "Central government debt rose to 81 percent of GDP, from 60 percent in 2019.",
    "Financing of the deficit included external bond issuance, drawdown of deposits and sovereign funds, and privatization proceeds.",
    "Medium-term fiscal adjustment plan (Tawazun) targets elimination of the fiscal deficit over 2021-25 by boosting non-oil revenues while keeping nominal fiscal expenditures broadly constant.",
    "Oman Investment Authority (OIA) established to strengthen governance and efficiency of public enterprises.",
    "New holding company Energy Development of Oman (EDO) created to manage and finance government investments in oil, gas, and renewables.",
    "Banks’ capital adequacy ratios averaged 19.1 percent.",
    "Liquidity Coverage Ratio around 200 percent.",
    "Nonperforming loan ratios increased slightly to 4.2 percent.",
    "Specific provisioning coverage of 63 percent and total coverage of 98 percent.",
    "Profitability indicators declined due to COVID-19 impact, loan deferments, and risk provision charges.",
    "Modest recovery anticipated for 2021 with substantial uncertainty.",
    "Projected mild recovery of 1.5 percent in non-oil GDP growth for 2021, rising to 4 percent by 2026 as drag from fiscal adjustment subsides.",
    "Roll-out of vaccination and easing of social distancing would support activity; substantial medium-term fiscal consolidation would weigh on growth.",
    "Upside risks: stronger rebound in global activity, confidence boost from successful fiscal adjustment implementation, successful strengthening of public enterprise governance.",
    "Downside risks: emergence of COVID-19 variants prolonging pandemic impact and volatility in oil prices significantly affecting outlook and macro balances.",
    "Continue to prioritize combating the pandemic (including vaccine rollout), support recovery, minimize long-lasting economic scarring, and mitigate risks to financial stability.",
    "Withdrawal of fiscal, monetary, and financial support should be carefully coordinated and calibrated to support hard-hit but viable sectors while reducing support where no longer needed.",
    "With substantial fiscal adjustment planned for 2021, prioritize fiscal support measures (including social safety nets) and accommodate them by streamlining other spending rather than expanding the deficit.",
    "Once recovery is established, financial policies should be increasingly targeted to reinforce fiscal and external sustainability, safeguard financial stability, and boost potential growth.",
    "Key revenue measures in the Medium-Term Fiscal Balance Plan: (i) introducing VAT in 2021; (ii) a personal income tax on high-income earners being developed; and (iii) full-year impact of the expansion of the excise tax base in 2020.",
    "Key expenditure measures: (i) containing the wage bill via civil service reforms; (ii) targeting energy subsidies to the most vulnerable groups; (iii) streamlining capital expenditure; and (iv) broad-based improvements in expenditure efficiency.",
    "Sustained commitment and active outreach needed to build broad support for measures given impact on activity and household incomes.",
    "IMF stands ready to provide technical assistance on establishing a sound medium term fiscal framework and a clear fiscal anchor.",
    "2021 budget envisages reducing the deficit (excluding oil condensate revenue and oil and gas related expenditure hived off to EDO) by about 6 percentage points of GDP to 7.5 percent.",
    "Proposed expenditure measures include civil service reform (including obligatory retirement scheme for long serving employees and lower salaries for new hires) and a 5 percent cut of other expenditure.",
    "Gross financing need projected at 14.5 percent of GDP, with the bulk expected to come from external sources.",
    "Explicit contingent liabilities of state-owned enterprises about 9.5 percent of GDP in 2019.",
    "Recommendation to develop a sovereign asset and liability management framework to manage and coordinate sovereign assets and liabilities in an integrated way, detect and mitigate sovereign risk exposures, and adopt a medium-term debt strategy.",
    "IMF technical assistance could support these efforts.",
    "Banks entered the crisis from a position of strength but face headwinds from asset quality deterioration, a low oil environment, and high credit and deposit concentration.",
    "Authorities’ stress test indicated domestic banks would remain above minimum capital adequacy under severe scenarios.",
    "Deferred loan installment payments and associated risk classification could obscure asset quality deterioration; closely monitor emerging credit risks, especially for hard-hit sectors.",
    "Case-by-case approach by banks to loan deferrals appears appropriate.",
    "Timing of ending loan deferral policy should be carefully calibrated to support viable sectors without undermining banking system buffers.",
    "At end-December 2020, deposits from government and government-related entities constituted around 28.3 percent of total deposits.",
    "Banks’ claims on government and government-related entities increased from 10.3 percent to 19.1 percent of total assets during 2014-2020.",
    "Strengthening the public sector balance sheet would help reduce public sector financing needs that may crowd out private sector lending.",
    "Steadfast implementation of structural reforms aligned with Oman Vision 2040 is paramount to promote economic diversification and job creation for Omanis, and support fiscal and external sustainability.",
    "Areas for reform: restructuring public administration; strengthening governance of state-owned enterprises; improving flexibility of labor markets; strengthening corporate restructuring mechanisms.",
    "Well-designed social safety nets would support labor reallocation toward expanding sectors.",
    "Oil and gas sector:",
    "National accounts:",
    "Central government finances:",
    "Monetary sector:",
    "External sector:",
    "[Oman and the IMF](http://www.imf.org/external/country/OMN/index.htm)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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