Forex reserves remain stable: CBO

Muscat: Amid a fall in oil revenue and subsequent high current account deficits over the recent few years, the Sultanate maintained relative stability in net foreign reserves. According to a report by the Central Bank of Oman (CBO), the net foreign reserves stood at about RO 6 billion at the end of 2018, up from RO 5.26 billion at the end of 2017.

“As a percentage of GDP, the net foreign reserves ranged from 19.3 to 25.1 per cent of GDP during 2013-2918”, the apex bank said in its Financial Stability Report 2019.

On the other hand, the CBO maintained adequate amounts of net foreign reserves to cover imports and other current account payments.

“The import cover of goods and services, well above the minimum international benchmark of three months, indicates the adequacy of foreign reserves,” asserts the report.

Foreign reserves of the CBO and the State General Reserve Fund (SGRF) constitute a crucial external buffer for the Omani economy against external shocks.

The foreign reserves are the cornerstone of the fixed-peg exchange rate regime.

It allows CBO to perform its function as the guardian of the Omani rial and protect the fixed-exchange-rate regime by providing the needed liquidity in foreign exchange to the domestic market in both normal and emergency times.

Moreover, adequate levels of CBO foreign reserves are needed to ensure the continued ability to purchase the necessary imports in case of an unexpected drop in regular inflows of foreign exchange.

The report points out that the net foreign reserves also maintained sufficiency in relation to domestic- currency cash holdings in Oman, supporting the stability of the fixed exchange rate regime in the Sultanate.

Despite the adverse external position since 2015, the net foreign reserves remained more than four times of currency in circulation, and this ratio significantly improved from 4.2 in 2017 to 4.8 in 2018.

“The net foreign reserves have also been consistently higher than the monetary base comprising currency in circulation and banks’ deposits with CBO, standing around 40 percent higher over the last three years,” the report adds.