Dubai: Oman's currency peg to the US dollar remains appropriate, though the country should take steps to prepare for a more flexible regime in the future as trade flows shift towards Asia, the International Monetary Fund (IMF) said yesterday.
In its annual Article IV review of the Omani economy, the IMF said it believes that Oman's "exchange rate is broadly aligned with fundamentals and that the policy of pegging to the US dollar remains appropriate".
"Nevertheless, in light of ongoing economic diversification and deepening trade ties with Asia, preparing for a more flexible regime in the long run would be prudent," the IMF added.
Oman and most other members of the Gulf Cooperation Council have pegged their currencies to the dollar for many years. Despite recent dollar weakness, Oman has reiterated it has no intention of abandoning the peg.
Excess liquidity
The IMF also said it supported the Omani central bank's continued efforts to absorb excess liquidity from the market on the back of higher public spending, and said it should be "ready to apply macroprudential measures if credit growth starts to feed into higher inflation."
Like many of its regional peers, Oman has increased spending recently to help battle the fallout from the global financial crisis as well as to try to head off domestic unrest. Amongst the incentives, the government increased the minimum monthly wage to 200 Omani riyals (Dh1,900) and pledged to build new housing and create 50,000 public jobs.
