Omani central bank chief still committed to dollar peg

The Central Bank of Oman (CBO) remains "firmly committed" to its fixed peg with the US dollar, in place since 1986, the bank's executive president Hamood Sangour Al Zadjali says in an interview published in the February 2014 issue of Central Banking journal.

"The benefits of the fixed peg are substantial, given our economic structure and high degrees of openness in both current and capital accounts," Al Zadjali argues, adding that it "helps in promoting investment, growth and diversification of the economy".

While Al Zadjali acknowledges the renminbi is "gaining popularity and attention from many reserve managers", he says the CBO has no plans to add it to its portfolio of reserve assets. The CBO "continues to invest in the core European markets, Germany, France and the Netherlands", but "the pre-eminence of the US dollar as the international reserve currency remains beyond doubt", he says.

He also says any direct impact on Oman from the unwinding of quantitative easing in the US will be "negligible" as long as oil prices remain steady, but acknowledges that a slowdown in global growth could pose "indirect risks to the region as a whole" if subsequent fluctuations in oil prices exacerbate some countries' fiscal and external imbalances.

‘Omanisation' of the banking sector

In the interview, Al Zadjali also discusses the CBO's efforts to increase the number of Omani nationals employed in the country's banking sector by using so-called "Omanisation targets" – adopted after an expansion of the banking sector "resulted in a dearth of local professionals… and banks had to resort to hiring qualified professionals from abroad".

"On average, the banks operating in Oman achieved Omanisation ratios of 100% for clerical and non-clerical [staff], 87.6% for managerial cadres, and 92.3% overall as of June 30, 2013," Al Zadjali notes. Last March, the CBO raised the ratio for clerical staff to 100% to be achieved by December 2013 and for middle and senior management cadres to 90% each to be achieved progressively by December 2016 and December 2018 respectively, he adds.

The full interview, which covers several topics, including the CBO's efforts to establish a more robust macro-prudential regulatory framework, the management of the bank's $14 billion-plus in foreign exchange reserves, and the merits of Islamic finance, is published in the February 2014 issue of Central Banking journal.