{
  "title": "Monetary Policy Transmission in Oman",
  "publication": "Selected Issues Papers, June 13, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139",
  "canonical": "https://www.imf.org/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139",
  "overlayPath": "/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/index.md",
  "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.",
  "sections": [
    {
      "heading": "Key findings",
      "content": "- Oman’s policy rates move closely with US monetary policy amid a pegged exchange rate to the US dollar and an open capital account.\n- Empirical analysis shows transmission from policy rates into effective lending and deposit rates remains subdued in Oman, even compared to GCC peers facing a high oil price environment with persistent excess liquidity in the banking system.\n- 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.\n- The note documents ongoing actions by Omani policymakers to strengthen transmission."
    },
    {
      "heading": "Transmission mechanisms and constraints",
      "content": "- Exchange rate regime and capital account openness: peg to the US dollar + open capital account → close alignment of Oman’s policy rates with US monetary policy.\n- Banking system characteristics:\n  - Persistent excess liquidity in the banking system reduces sensitivity of effective lending and deposit rates to policy rate changes.\n  - Low bank exposure to SMEs and riskier borrowers constrains transmission to broader credit conditions.\n- Regulatory constraints:\n  - A cap on personal loan rates acts as a binding constraint on passthrough into effective lending rates."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Strengthen liquidity management to reduce persistent excess liquidity and improve responsiveness of market rates to policy rate changes.\n- Enhance reserve management to support more effective transmission from policy rates to market rates.\n- Consider relaxing or removing the interest rate cap on personal loans to allow more complete pass-through of policy rate changes into effective lending rates."
    },
    {
      "heading": "Supplementary observations",
      "content": "- The analysis is presented as a Selected Issues Paper by Thomas Kroen, dated June 13, 2024.\n- The paper emphasizes comparisons with GCC peers operating under similar oil price and liquidity environments and focuses on the interplay of policy rate setting, regulatory constraints, and bank balance-sheet exposures.\n\nInternational Monetary Fund — Selected Issues Paper No. 2024/018\n\n---\n\n Content in this bundle\n\n- Monetary Policy Transmission in Oman; Selected Issues Paper No 2024/018; December 14, 2023\n  - Monetary Policy Transmission in Oman; Selected Issues Paper No 2024/018; December 14, 2023 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Monetary Policy Transmission in Oman; Selected Issues Paper No 2024/018; December 14, 2023 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/index.md)",
    "[Structured JSON version](/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/index.json)",
    "[Bundle manifest](/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/bundle-manifest.json)",
    "Authors: Thomas Kroen",
    "Published: June 13, 2024",
    "Series: Selected Issues Papers",
    "DOI: https://doi.org/10.5089/9798400278358.018",
    "Oman’s policy rates move closely with US monetary policy amid a pegged exchange rate to the US dollar and an open capital account.",
    "Empirical analysis shows transmission from policy rates into effective lending and deposit rates remains subdued in Oman, even compared to GCC peers facing 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.",
    "Exchange rate regime and capital account openness: peg to the US dollar + open capital account → close alignment of Oman’s policy rates with US monetary policy.",
    "Banking system characteristics:",
    "Regulatory constraints:",
    "Strengthen liquidity management to reduce persistent excess liquidity and improve responsiveness of market rates to policy rate changes.",
    "Enhance reserve management to support more effective transmission from policy rates to market rates.",
    "Consider relaxing or removing the interest rate cap on personal loans to allow more complete pass-through of policy rate changes into effective lending rates.",
    "The analysis is presented as a Selected Issues Paper by Thomas Kroen, dated June 13, 2024.",
    "The paper emphasizes comparisons with GCC peers operating under similar oil price and liquidity environments and focuses on the interplay of policy rate setting, regulatory constraints, and bank balance-sheet exposures.",
    "**Monetary Policy Transmission in Oman; Selected Issues Paper No 2024/018; December 14, 2023**"
  ],
  "related": [
    {
      "title": "Monetary Policy Transmission in Oman; Selected Issues Paper No 2024/018; December 14, 2023",
      "role": "document",
      "sourceUrl": "https://www.imf.org/-/media/files/publications/selected-issues-papers/2024/english/sipea2024018.pdf",
      "summary": {
        "path": "/-/media/files/publications/selected-issues-papers/2024/english/sipea2024018.pdf.md",
        "mime": "text/markdown"
      },
      "binary": {
        "path": "/-/media/files/publications/selected-issues-papers/2024/english/sipea2024018.pdf",
        "mime": "application/pdf"
      }
    }
  ],
  "alternates": {
    "markdown": "/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/index.md",
    "json": "/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/index.json",
    "bundleManifest": "/en/publications/selected-issues-papers/issues/2024/06/12/monetary-policy-transmission-in-oman-550139/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-20T19:48:30.445Z"
}