IMF Executive Board Concludes 2023 Article IV Consultation with Oman

January 23, 2024

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Oman.

Supported by favorable oil prices and sustained reform momentum, Oman’s economic recovery continues while inflation remains contained. The economy grew by 4.3 percent in 2022, primarily driven by the hydrocarbon sector, before slowing down to 2.1 percent (year on year) in the first half of 2023 on the back of OPEC+-related oil production cuts. Non-hydrocarbon growth accelerated from 1.2 percent in 2022 to 2.7 percent in the first half of 2023, driven by recovering agricultural and construction activities and robust services sector. Subsidies on basic food items, caps on domestic petroleum prices, and the peg to a strong US dollar helped contain inflation, which receded from 2.8 percent in 2022 to 1.2 percent during January-September 2023.

Prudent fiscal management and high oil prices have helped turn fiscal and external balances into surpluses since 2022, with the overall fiscal balance estimated at 5.5 percent of GDP and the current account balance at 2.8 percent of GDP in 2023. Notwithstanding the hydrocarbon windfall, the non-hydrocarbon primary deficit remained on a downward trajectory, attesting to the authorities’ commitment to fiscal discipline. Central government debt as a share of GDP declined from about 68 percent in 2020 to 38 percent in 2023. Oman's sovereign credit rating has been upgraded to one notch below investment grade and its sovereign spreads have become broadly at par with the average for Gulf Cooperation Council countries and well below that of emerging markets.

The banking sector remains resilient. Profitability has recovered to pre-pandemic levels, capital and liquidity ratios are well above regulatory requirements, and non-performing loans remain low and sufficiently provisioned. Stress tests suggest that banks are resilient to credit and liquidity shocks.

Risks to the economic outlook are balanced. On the upside, growth would be supported by higher oil prices—that could be triggered by supply and demand imbalances—and an acceleration of Vision 2040 reform plans and investments from regional partners. A faster global disinflation process resulting in global monetary policy easing could also support domestic growth by strengthening external demand. On the downside, a sharp decline in oil prices, including from a deeper-than-expected economic deceleration in China, would depress growth and have an adverse effect on fiscal and external accounts. A slowdown in the implementation of the reform agenda also represents a key risk to the outlook. The uncertainty around the outlook is exacerbated by potential indirect spillovers from the ongoing conflict in Gaza and Israel.

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities’ macroeconomic management and broad reform efforts, supported by favorable oil prices, that contributed to further strengthening of the fiscal and external positions, preserving financial stability, and lowering public debt amid heightened global uncertainty and recurrent shocks. While noting that the outlook remains favorable and risks are balanced, Directors emphasized the importance of continuing the implementation of reforms to entrench fiscal sustainability and ensure intergenerational equity, while safeguarding financial stability and accelerating economic diversification.

Directors welcomed the authorities’ continued commitment to prudent fiscal management while strengthening the social safety net, including through the new social protection law. They underscored the importance of pursuing the ongoing tax administration reform program and phasing out untargeted subsidies as critical measures to further enhance fiscal sustainability. Directors also highlighted the importance of strengthening and institutionalizing the medium-term fiscal framework. Enhancing the transparency of fiscal accounts, expanding their coverage, and disclosing fiscal risks while developing a sovereign asset liability management framework would be key actions to take going forward.

Directors agreed that the exchange rate peg continues to serve Oman well as a monetary anchor. They stressed that measures to strengthen the monetary transmission mechanism should continue to ensure that institutions are in place to support a more independent monetary policy regime in the future. In this context, Directors emphasized the importance of sustaining the progress under the Monetary Policy Enhancement Project.

Directors welcomed the continued resilience of the banking sector, while indicating that further efforts are needed to strengthen the regulatory framework to cement financial stability. They encouraged the authorities to return the capital conservation buffer to pre-pandemic levels, re-assess the list of domestic systemically important institutions, and further enhance the AML/CFT framework. They also underscored the importance of further developing the financial sector to enhance access to finance and support economic diversification, including through enhanced digitalization while being mindful of associated risks.

Directors welcomed the progress on the ambitious structural reform agenda under Oman Vision 2040 and its goals to promote sustained, diversified, inclusive, and private sector-led growth. They commended the authorities for the passage of the new labor law and encouraged them to continue enhancing labor market flexibility and empowering women. Pressing ahead with improving institutional quality, reducing the state footprint, enhancing the business environment, while maintaining the commitment to the ambitious climate agenda and investing in renewable energy would foster economic diversification and facilitate a smooth energy transition.

It is expected that the next Article IV consultation with Oman will be held on the standard 12-month cycle.

Oman: Selected Economic Indicators, 2020–28

2020

2021

2022

2023

2024

2025

2026

2027

2028

Proj.

Proj.

Proj.

Proj.

Proj.

Proj.

Oil and Gas Sector

Average crude oil export price
(US$/barrel)

46.0

64.3

95.4

80.0

79.9

76.0

72.7

69.9

67.5

Crude and condensates
oil production
(in millions of barrels/day)

0.951

0.971

1.064

1.048

1.021

1.050

1.088

1.110

1.132

of which: Crude oil
(in millions of barrels/day)

0.760

0.782

0.848

0.814

0.791

0.819

0.849

0.866

0.883

Natural gas production
(in millions of cubic meters per day)

121.9

132.2

137.2

146.4

155.9

159.2

162.2

167.1

168.1

National Accounts

(Annual percentage change, unless otherwise indicated)

Nominal GDP (US$ billions)

75.9

88.2

114.7

108.2

111.1

113.6

117.1

120.7

124.9

Nominal GDP
(in billions of Omani rials)

29.2

33.9

44.1

41.6

42.7

43.7

45.0

46.4

48.0

Real GDP

-3.4

3.1

4.3

1.3

1.4

2.9

3.5

3.2

3.1

Real hydrocarbon GDP 1/

-3.6

5.2

9.6

0.0

-0.5

2.5

3.0

2.0

1.6

Real non-hydrocarbon GDP

-3.3

1.9

1.2

2.1

2.5

3.2

3.9

4.0

4.0

Consumer prices (average)

-0.9

1.5

2.8

1.2

1.7

2.0

2.0

2.0

2.0

GDP Deflator

-10.8

12.7

24.6

-6.8

1.3

-0.7

-0.4

-0.1

0.3

Investment and Saving

(Percent of GDP)

Gross capital formation

27.6

22.4

23.2

24.4

24.5

25.3

25.5

26.3

26.9

Public

12.3

7.5

7.0

6.6

6.7

6.5

6.0

5.9

5.9

Private

19.3

18.2

16.2

17.8

17.8

18.8

19.5

20.4

21.0

Gross national savings

11.5

17.0

28.2

27.2

27.3

27.7

27.8

28.1

28.7

Public

-0.1

6.8

19.8

14.3

13.6

13.0

12.4

11.5

10.8

Private

11.6

10.2

8.4

12.9

13.7

14.7

15.4

16.5

17.9

Central Government Finances

(Percent of GDP)

Revenue and grants

28.9

33.0

39.7

31.8

30.9

30.4

29.6

28.5

27.4

Hydrocarbon

21.7

25.9

32.3

23.6

22.6

22.0

21.1

20.0

18.9

Non-hydrocarbon and grants

7.2

7.1

7.4

8.2

8.3

8.3

8.5

8.5

8.4

Expenditure

44.5

36.1

29.6

26.2

27.2

26.2

25.2

24.6

24.0

Current

36.3

32.7

26.7

23.6

24.5

23.7

23.2

22.7

22.2

Capital

8.3

3.5

3.0

2.6

2.7

2.5

2.0

1.9

1.9

Overall balance
(Net lending/borrowing)

-15.7

-3.1

10.1

5.5

3.7

4.1

4.4

3.8

3.3

Overall balance
(adjusted) 2/

-9.6

-0.8

10.1

5.5

3.7

4.1

4.4

3.8

3.3

Non-hydrocarbon
primary balance
(percent of non-hydrocarbon
GDP)

-37.3

-32.4

-31.6

-28.2

-29.0

-26.8

-24.3

-23.1

-21.8

Central government debt,
of which:

67.9

61.3

39.9

37.7

35.7

33.7

31.9

30.5

29.4

External debt

50.4

46.0

30.1

28.0

25.5

23.3

21.6

20.8

20.1

Public debt, of which:

108.1

102.0

69.8

SOEs debt

40.2

40.7

29.9

Net financial assets

-27.7

-24.9

-10.3

-5.0

-2.3

-0.4

1.5

2.9

3.9

Monetary Sector

(Annual percentage change, unless otherwise indicated)

Net foreign assets

-28.4

31.2

-0.8

-2.0

6.1

19.8

9.9

13.7

11.6

Net domestic assets

23.4

-1.4

1.0

11.1

3.6

-0.3

2.4

1.0

1.7

Credit to the private sector

1.1

2.3

4.2

6.3

3.4

3.7

4.3

4.9

5.1

Broad money

8.9

4.6

0.6

8.2

4.1

3.9

4.2

4.2

4.5

External Sector

(In billions of U.S. dollars, unless otherwise indicated)

Exports of goods

33.4

44.3

66.1

60.2

64.3

64.6

65.6

66.4

67.5

Oil and gas

18.2

25.9

43.1

36.5

39.1

37.9

37.4

36.5

35.8

Other

15.3

18.5

23.0

23.7

25.2

26.7

28.2

29.9

31.8

Imports of goods

-25.4

-28.0

-34.7

-35.0

-38.8

-39.4

-39.9

-40.7

-41.6

Current account balance

-12.3

-4.8

5.8

3.1

3.1

2.7

2.7

2.1

2.2

Percent of GDP

-16.2

-5.4

5.0

2.8

2.8

2.4

2.3

1.8

1.8

Central Bank gross reserves

15.0

19.7

17.6

17.5

18.4

21.1

22.8

25.3

27.8

In months of next year's
imports of goods and services

4.8

5.1

4.5

4.1

4.2

4.8

5.1

5.5

5.9

Total external debt

72.8

79.8

70.0

66.6

63.5

63.1

61.5

61.6

61.6

Percent of GDP

95.9

90.5

61.0

61.5

57.2

55.5

52.5

51.0

49.3

Sources: Omani authorities;
and IMF staff estimates and projections.

1/ Includes crude oil, refining,
natural gas, and LNG production.

2/ Data prior to 2022 were adjusted
by taking out expenditures on gas
and oil that were hived off to
Energy Development Oman in 2021.


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .

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