## IMF Executive Board Concludes 2021 Article IV Consultation with Oman _IMF News, September 12, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Oman](https://www.imf.org/en/news/articles/2021/09/10/pr21259-oman-imf-executive-board-concludes-2021-article-iv-consultation-with-oman) ## Other formats - [Markdown version](/en/news/articles/2021/09/10/pr21259-oman-imf-executive-board-concludes-2021-article-iv-consultation-with-oman/index.md) - [Structured JSON version](/en/news/articles/2021/09/10/pr21259-oman-imf-executive-board-concludes-2021-article-iv-consultation-with-oman/index.json) - [Bundle manifest](/en/news/articles/2021/09/10/pr21259-oman-imf-executive-board-concludes-2021-article-iv-consultation-with-oman/bundle-manifest.json) ## Bibliographic details - Published: September 12, 2021 --- ### Economic impact and near-term outlook - The Omani economy was hit by a dual shock of the pandemic and a collapse in oil prices in 2020. - Overall GDP is estimated to have contracted by 2.8 percent in 2020. - Non-hydrocarbon GDP is estimated to have contracted by 3.9 percent in 2020. - Labor market adjustment was facilitated by temporary wage cuts and a reduction in expatriate employment. - The economy is set to recover in 2021, with non-hydrocarbon GDP growth of 1.5 percent as vaccine rollout gradually restores domestic activity along with recovery of external demand. - Oil production is projected to increase after the current OPEC+ agreement expires in April 2022. - Inflation has been subdued. ### Fiscal developments and public debt - The fiscal deficit widened to 19.3 percent of GDP in 2020, partly reflecting non-policy factors (notably the contraction in nominal GDP). - The fiscal deficit is projected to decline to -2.4 percent in 2021 and to register a surplus in 2022. - Central government debt rose to 81.2 percent of GDP in 2020. - Financing needs in 2020 were covered by domestic and external borrowing and asset drawdown. - Debt is expected to decline sharply over the medium term with implementation of the authorities’ Medium-Term Fiscal Balance Plan. - The Medium-Term Fiscal Balance Plan aims to contain expenditure, reduce dependency of revenue on hydrocarbon prices, and put debt on a downward path. Key fiscal indicators (selected, exact values from table) - Nominal GDP (US$ billions): 63.4 (2020), 77.7 (2021 projected), 82.3 (2022 projected) - Nominal GDP (in billions of Omani rials): 24.4 (2020), 29.9 (2021 projected), 31.7 (2022 projected) - Overall balance (Net lending/borrowing): -19.3 (2020), -2.4 (2021 projected), 1.8 (2022 projected) - Total government debt: 81.2 (2020), 70.7 (2021 projected), 64.5 (2022 projected) - Revenue and grants (percent of GDP): 32.9 (2020), 35.3 (2021 projected), 34.8 (2022 projected) - Expenditure (percent of GDP): 53.5 (2020), 35.4 (2021 projected), 34.4 (2022 projected) ### External sector and reserves - Fiscal consolidation and higher oil prices are projected to narrow the current account deficit to -6.2 percent in 2021 and -0.6 percent in 2026. - Central Bank gross reserves (US$ billions): 15.0 (2020), 15.8 (2021 projected), 16.4 (2022 projected), 17.2 (2023 projected), 18.1 (2024 projected), 19.1 (2025 projected) - Central Bank gross reserves in months of next year's imports of goods and services: 5.7 (2020) - Exports of goods (US$ billions): 42.6 (2020), 44.3 (2021 projected) - Oil and gas exports (US$ billions): 24.7 (2020), 28.3 (2021 projected) - Total external debt (percent of GDP): 72.7 (2020), 78.6 (2021 projected), 78.2 (2022 projected), 78.3 (2023 projected), 78.9 (2024 projected), 80.0 (2025 projected) ### Monetary and financial sector - Directors agreed that the exchange rate peg remains an appropriate policy anchor for Oman, helping to deliver low and stable inflation. - The banking system remains sound and the financial sector has shown continued resilience. - Continued vigilance is required to contain financial stability risks given substantial uncertainties in the outlook. - Directors called for careful management of the sovereign-bank nexus over time to support banking system resilience. - Directors welcomed the AML/CFT mutual evaluation in 2021 and ongoing strengthening of the framework. - Directors welcomed ongoing capital market reforms. Selected monetary statistics (exact values from table) - Net foreign assets: -1.1 (2020), 1.7 (2021 projected), 5.8 (2022 projected), 6.7 (2023 projected), 6.4 (2024 projected) - Net domestic assets: 7.3 (2020), 5.6 (2021 projected), 1.0 (2022 projected) - Broad money: 1.9 (2020) ### Risks and uncertainties - Substantial uncertainties around the outlook, with downside risks dominating. - Downside risks include: - COVID-19 variants prolonging the impact of the pandemic. - Tighter global financial conditions worsening fiscal and external positions. - Public debt vulnerability to shocks from oil market developments and shocks to GDP growth, the exchange rate, primary balance, and interest rates. - A substantial decline in oil prices increasing gross financing needs and generating negative spillovers in the non-hydrocarbon sector. - Upside factors include: - Strong roll-out of vaccination. - Higher oil prices. - Continued implementation of structural reforms. ### Structural reforms and labor market - Directors welcomed recent progress in structural reforms aiming at boosting non-hydrocarbon sector growth and supporting external sustainability. - Priority reforms recommended: - Improve flexibility in the labor market. - Promote employment in the private sector. - Further encourage female labor participation. - Directors welcomed efforts to strengthen the social safety net. - Directors commended the authorities for accelerating SOE reforms to enhance competition and efficiently manage public resources. ### Executive Board assessment and governance recommendations - Executive Directors commended the Omani authorities’ swift and well-coordinated policy actions to address the health and economic effects of the COVID-19 pandemic. - Directors emphasized that macroeconomic policies should remain supportive until the recovery is fully entrenched and supported providing additional time-bound and targeted policy measures for hard-hit sectors and households if needed. - Directors welcomed the authorities’ strong commitment to implementing the Medium-Term Fiscal Balance Program and encouraged sustained outreach to bolster public support for reforms. - Governance and transparency recommendations: - Establish a clear fiscal anchor to help achieve fiscal consolidation. - Strengthen overall public sector governance. - Expand fiscal coverage beyond the budgetary central government and provide more detailed budget and debt data. - Develop a robust sovereign asset and liability management framework to identify and mitigate risk exposures and secure the sovereign balance sheet. - Strengthen the capacity of the debt management office. ### Publication and next steps - Directors welcomed the authorities’ decision to publish the staff report for the consultation. - It is expected that the next Article IV consultation with Oman will be held on the standard 12-month cycle. *Source: IMF Press Release No. 21/259 — IMF Executive Board Concludes 2021 Article IV Consultation with Oman.* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [Oman and the IMF](http://www.imf.org/external/country/OMN/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/09/10/pr21259-oman-imf-executive-board-concludes-2021-article-iv-consultation-with-oman_