Muscat: Oman’s central bank plans to raise OMR150 million by issuing government development bonds in December, which will take the total size of bond issues this year to OMR600 million, said Tahir Salim Al Amri, Executive President, Central Bank of Oman (CBO).
In his first interview with the media after assuming charge, Al Amri revealed that three bond issues of OMR150 million each were floated in February, May and September to raise OMR450 million so far this year. The first bond issue this year in February had a seven-year tenure, while the other two issues had a maturity of six and ten years, respectively.
Referring to the central bank’s policy on personal loan interest ceiling, he remarked; “Currently, the personal loan interest rate ceiling stands at 6 per cent per annum for all the loans extended since October 2013. The CBO conducts periodical reviews of the personal loan ceiling rate, and it is fixed methodically providing for reasonable risk premium and profit.”
“Now, the global interest rate scenario is still relatively benign, despite the US Fed gradually increasing the short term interest rates. It has also been seen that most banks are lending at slightly lower than the ceiling rates, and there is some marginal cushion still available,” added the CBO chief.
The average repo rate that is used to inject liquidity stood at 1.732 per cent in August 2017, as against 1.193 per cent at the end of December 2016.
Regarding the trend in interest rates, Al Abri stated; “With some tightening in liquidity conditions and the upward movement in US Fed rates, there has been marginal uptick in the level of interest rates in Oman. The weighted average interest rate on Rial Omani deposits which stood at 0.936 per cent in December 2015 edged up to 1.493 per cent in December 2016 and further to 1.673 per cent in August 2017. Similarly, the weighted average Rial Omani lending interest rate registered an increase from 4.762 per cent in December 2015 to 5.084 per cent in December 2016 and further to 5.162 per cent in August 2017.”
The overnight domestic call money rate also firmed up from 0.189 per cent in December 2015 to 0.470 per cent in December 2016 and moved up further to 1.237 per cent in August 2017. “Despite the interest rates on both deposits and lending edging up, the earnings of commercial banks are not expected to register any major decline, as the interest rate margins have not suffered any significant setback,” noted the CBO chief.
Given the fixed exchange rate peg of the Rial Omani with the US dollar, the interest rates in Oman are expected to broadly converge with the interest rates prevailing in the USA. CBO’s policy interest rates, such as the Repo rate, are closely aligned to the corresponding London Interbank Offered Rate (Libor).