CBO Releases Annual Report 2015
The Central Bank of Oman (CBO) released its Annual Report 2015 on June 30, 2016. The Report reflects the overall assessment of Oman’s macroeconomic developments during 2015 and analyses major sectors of the economy covered under five Chapters on Output,
Employment and Prices (Chapter II); Oil and Gas (Chapter III); Public Finance (Chapter IV); Money, Banking and Financial Institutions (Chapter V); and Foreign Trade and Balance of Payments (Chapter VI). The Chapter I on Overview and Outlook provides a brief review of macroeconomic developments in the first half of 2016 to present an assessment of the expected outlook for the economy in the near-term. The Annual Report also carries the audited balance sheet of the CBO as well as important CBO regulations issued during 2015 and the first half of 2016.
After five uninterrupted years of robust growth, the Omani economy recorded a contraction in 2015, mainly on account of marked drop in oil prices in the international markets and partly due to global slowdown. Despite increased oil production, net exports suffered a setback in 2015 due to low oil prices.
Prudent fiscal consolidation measures reduced Government expenditure significantly in order to contain deterioration in the budget balances. Consequently, nominal GDP contracted by 14.1 percent in 2015 reflecting the reduction in two key constituents of aggregate demand, namely, rationalization in Government expenditure and slowdown in exports as against a robust average growth of 11.3 percent during the five year period from 2010 to 2014.
Creation of adequate employment opportunities for the Omanis has been one of the major macroeconomic objectives of the Government during the recent years. During 2015, employment of Omanis in the private sector increased by 6.1 percent.
Inflationary pressures in Oman abated significantly in 2015 mainly due to the decline in international commodity prices, reduced public spending in Oman and notable appreciation of US Dollar in real effective terms since mid-2014. Annual inflation measured by movement in the average Consumer Price Index (CPI) for the Sultanate decelerated to 0.1 percent in 2015 compared with an average of 2.5 percent during the previous five years. The recent behavior of prices in Oman owes its origin to both demand and supply side factors emanating from domestic as well as external sources. From the demand side, contraction in the nominal GDP in Oman in 2015 was mainly due to sharp fall in crude oil prices in the global markets and fiscal policies pursued by the Government.
Among the supply side factors, marked drop in world food and metal prices coupled with decline in import prices in 2015 facilitated making goods cheaper in Oman.
Lord Mayor of London Visits CBO (29/03/2016)
His Excellency Hamood bin Sangour Al-Zadjali, the Executive President of the Central Bank of Oman, welcomed Lord Jeffrey Mountevans, the Lord Mayor of London, and the accompanying delegation at CBO Head Office on Tuesday, March 29th 2016.
Mr. Jonathon Paul Wilks, UK Ambassador to the Sultanate of Oman and members from the UK Embassy were also part of the delegation.
The visiting delegation discussed bilateral relations between the Sultanate and the UK in the different banking and financial disciplines, focusing alongside on the need to enhance relations between Omani and British banking institutions.
The delegation also discussed ways to make use of the studies and programs conducted by the Bank of England in the banking sector.
During the interaction, His Excellency the Executive President of CBO provided a brief background of Sultanate's monetary and banking policy and the prominent supervisory systems and measures applied in the banking sector to the visitors.
He also highlighted the achievements that took place in the banking discipline in Oman since the inauguration of the first British bank in Muscat in 1948 called HSBC Bank Middle East, which several years ago became HSBC Oman because of the 49% Omani ownership.
Elaborating further His Excellency explained that the Omani banking sector currently has 7 local banks and 9 branches of foreign banks in addition to 2 specialized banks and 2 fully-fledged Islamic banks.
He noted that the banking sector has witnessed several mergers between banking institutions during the past 4 decades thanks to the incentives offered by CBO.
In order to create major banking entities in the country, His Excellency also affirmed that the door for further mergers and acquisitions was still wide open in the Sultanate.
He informed the delegation that Omani banks were well placed with comfortable capital buffers and that they have been offering financial facilities to all sectors and establishments, especially SMEs, in line with the instructions issued by CBO in this regard.
Furthermore, His Excellency also discussed the issue of training, qualification and educational programs provided by British banks, particularly those offered by the Bank of England, and deliberated on how these can be utilized in training Omani bankers.
The esteemed guest commended the achievements of the Omani banking sector and emphasized the need to enhance cooperation among Omani and British banking institutions in all disciplines. He said that this initiative will effectively contribute in strengthening relations and also in help in economic, financial, touristic and educational collaboration between the two countries.
Lord Jeffrey Mountevans and the accompanying delegation later toured the Currency Museum, where the delegation was given a briefing about the historical origin of the currencies in Oman and their circulation during different periods of time. The delegation also learnt about the different currencies issued by CBO during the prosperous era of His Majesty Sultan Qaboos bin Said.
The esteemed guest chose to record his comments in the visitors' log of the museum, lauding the informative and historic tour of the museum, its different types of possessions, which he said depicted the diverse facets of the Omani culture and its monetary history.
CBO Holds its First Board Meeting of the Year
The Central Bank of Oman's Board of Governors which met here for the first time this year on Sunday 27th March 2016, took important decisions pertaining to the banking sector.
The meeting which was chaired by H.E. Dr. Ali bin Mohammed bin Moosa, Deputy Chairman of CBO's Board of Governors, reviewed various issues on its agenda including the review of the Economic and Financial report upto 31st December 2016.
In the meeting, the Board approved the application of Bank Muscat allowing it to open a Representative Office in Tehran (Iran). In view of the saturation in the domestic market, the Board decided to continue with moratorium on licensing new money Exchange Companies for another two years until end of 2017.
The Board also approved the application of Wasel Exchange to acquire the operations of Musandam Exchange. It also agreed to permit Finance and Leasing Companies to accept deposits from corporates only, based on certain conditions.
In addition to reviewing the actions taken by the Central Bank of Oman and licensed banks operating in Oman with regard to the financing of Small and Medium enterprises, the Board endorsed the audited accounts of Central Bank of Oman, Deposit Insurance Fund and pension scheme of Central Bank of Oman as at 31st December 2015.
Additionally, the Board also reviewed the Management letter report of the external auditors and annual report of the CBO Internal Audit Committee.
CBO's financial position as at the end of February 2016 and the performance of CBO's external investments during the period under review also came up for Board scrutiny during its meeting.
Besides reviewing the activity report of CBO's Departments during the period under review, the Board also examined the financial and administrative matters of CBO and has taken necessary decisions in this regard.
CBO Advises Public to Refrain from Defiling National Currency
The Central Bank of Oman has called upon the residents of the country to abstain from defiling the national currency notes and coins, and has requested the Public to respect and protect the same, as it represents and contains the national symbols.
In a Public Notice issued on Saturday, March 12th 2016, CBO which drew attention of the public to this issue noted that national banknotes were being mutilated and the currency coins were being misused by the public. "This mutilation takes place by affixing seals on the banknotes or writing on them or otherwise misusing them one way or another, resulting in changing their look, features or damaging them," the CBO notice remarked.
The CBO notice further cautioned that some outlets and shops were selling garlands, wreaths, and arches made of the national currencies which contravened the provisions of Oman Banking Law No. 114/2000, it said.
Evidently, any use of the national banknotes and the currency coins for other than circulation as public tender falls under penalty of law, the notice informed.
It violates Article 43 (b) of Oman Banking Law, which stipulates that: "Any violation of this Article shall be an offense against public confidence as provided in Chapter One, Title Three, Book Two of Oman Penal Code or any other law replacing it."
CBO Issues Advisory on SMEs Definition
The Central Bank of Oman has asked all the banks operating in the Sultanate to be guided by the criteria regarding the definition of SME, as provided by the Public Authority for Small and Medium Enterprises Development – vide its Decision 1/2016 dated 4th January 2016.
Referring to the criteria from the Public Authority on the SMEs, the CBO in its BM 1141 circular noted that the new criteria defines Micro Enterprises, as those units which have an employee strength of one to five (1 to 5) and an annual turnover of less than RO 100,000.
The criteria for Small Enterprises will be the employee strength of 6 to 25 employees with an annual turnover between RO 100,000 and less than RO 500,000.
Similarly of the Medium Enterprises, the criteria will be 25 to 99 employees with an annual turnover between RO 500,000 and less than 3 million.
If an enterprise does not meet one of the criteria, it will fall into the higher category or go out of the SME segment, as the case may be, the BM Circular said.
CBO further advised that all licensed banks shall be guided accordingly, availing the revision and enhancing their financial and non-financial assistance to the SME segment – noting that 5% fund-based credit target remains in force and further decision, on review, will be conveyed separately.