Oman’s Broad Money Supply Rises 11% to RO 24.8 Billion Amid Banking Sector Changes

Muscat, January 30 – Oman’s broad money supply (M2) witnessed an annual increase of 11%, reaching RO 24.8 billion by the end of November 2024, according to the latest figures released by the Central Bank of Oman (CBO). The surge was fueled by a 22.1% rise in narrow money (M1) and a 7.1% increase in quasi-money, which includes savings deposits, time deposits, certificates of deposit, margin accounts, and foreign currency deposits within the banking system.

Shift in Liquidity Preferences

While overall money supply grew, cash held by the public declined by 8%, indicating a shift in financial behavior. At the same time, demand deposits surged by 30.1%, suggesting that individuals and businesses prefer maintaining liquid assets in bank accounts rather than holding physical cash.

Interest Rate Trends in the Banking Sector

In the conventional commercial banking sector, interest rates saw notable changes:

• Weighted average interest rate on deposits in Omani riyals rose from 2.603% in November 2023 to 2.733% in November 2024.
• Weighted average interest rate on loans increased from 5.485% to 5.667% over the same period, reflecting a tightening of lending conditions.

Interbank Lending and Monetary Policy Adjustments

Oman’s interbank lending market also experienced fluctuations:

• The average overnight lending rate dropped to 4.563% in November 2024, down from 5.459% a year earlier.
• The weighted average interest rate on repurchase operations fell to 5.308% from 6%, aligning with policy shifts by the U.S. Federal Reserve, which influenced monetary conditions in Oman.

Outlook for the Banking Sector

The rise in broad money supply and changing liquidity patterns highlight Oman’s evolving financial landscape, shaped by shifts in banking policies, economic conditions, and global monetary trends. As the Sultanate continues to adapt to economic developments, the banking sector is expected to play a pivotal role in supporting sustainable growth and financial stability.

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