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Oman 2018 | FINANCE | INTERVIEW

TBY talks to HE Tahir Bin Salim Bin Abdullah Al Amri, Executive President of the Central Bank of Oman (CBO), on revising the country's FDI laws, financing the fiscal debt via issuing bonds, and its efforts to promote SMEs.

 HE Tahir Bin Salim Bin Abdullah Al Amri
BIOGRAPHY
HE Tahir Bin Salim Bin Abdullah Al Amri was appointed Executive President of the Central Bank in September 2017. He is an experienced treasury and finance professional with a successful track record in all aspects of treasury and finance functions. He serves as a board member of a number of private and public entities with multimillion turnovers for a variety of businesses, from a leading local bank to sovereign wealth funds, shipping, and the oil and gas industry. He has played leading roles in negotiating financing agreements, writing articles of association, technical licensing and construction contracts, oil and gas upstream agreements, shareholder agreements, shipping contracts, establishing credit policies and procedures, and board audit committees.

What issues will the new FDI Law address, and what impact will it have on the Omani economy?

With a view to attracting long-term foreign investment flows, the FDI law is being revised comprehensively. The new law will address major concerns and shortcomings in the current law. Foreign investors' rights and obligations will be clearly set out in the new law. The proposed investment law would provide dispute resolution and include international arbitration.

What are the Central Bank's current plans regarding international bond issuance, and what impact will this have on market liquidity?

Oman's external funding gap has been met mostly by external borrowings by the sovereign. With a view to finance the fiscal deficit, Oman's government raised USD5 billion in March 2017 through international bonds in tranches of five, 10, and 30 years. Public sector enterprises and conventional banks have also been encouraged to meet their long-term funding needs by medium-term borrowing from abroad in recent times. In regard to liquidity, CBO continued its accommodating monetary policy stance, continuously monitoring the liquidity situation and ensuring the availability of adequate credit for productive activities. CBO has also taken regulatory and supervisory measures so that banks remain well capitalized and healthy in the face of incipient delinquency as a result of the economic slowdown.

Where does Oman currently stand in terms of government development bonds and sukuk bonds?

With regard to the capital market, there were four issuances of government development bonds mobilizing a total of OMR450 million and one redemption amounting to OMR150 million during 2016. There was also an Ijara Sukuk by private placement amounting to USD500 million during the year. With the diversification of the economy, the corporate sector in Oman is also expected to raise resources from the market by issuing debt securities.

What are the current guidelines for SME financing, and what modifications can be expected in the near future?

Keeping in view the vital role played by SMEs in creating employment and developing a supply chain for the industrial sector, CBO is continuously making efforts toward promoting SMEs, which would facilitate diversification of the economy. CBO also mandated formal credit target of 5% of banks' total credit to the SME sector. The prudential requirements for banks to lend to SMEs have also been relaxed in terms of general provisioning requirements and risk weightage. Banks have made concerted efforts to increase their SME credit portfolio and are close to fully achieving the target. The definition of the criteria to classify SMEs has been modified based on the clarification given by the Public Authority for SMEs Development, and CBO is monitoring the progress of the SME credit target. With a view to enable banks to achieve the 5% target, CBO has allowed banks to reckon non-funded credit, up to a maximum of 1% of total credit within the overall target of 5%, effective April 26, 2017. This dispensation to non-fund based credit along with banks' fund-based credit and direct contributions would ease the constraints faced by SMEs.

What are the Central Bank's main objectives for 2017-2018?

Economic activity in Oman further weakened in 2016 in the wake of low oil prices, slowdown in world growth, and subdued global trade. The authorities have been taking policy measures to move ahead on the path of fiscal sustainability in the medium term. Reining in public expenditure, augmenting non-oil revenue, and pursuing economic diversification are the key facets of the State General Budget for 2017. In order to preserve fiscal buffers and take advantage of the relatively low cost of funds in international financial markets, the government has resorted mainly to external commercial borrowings, which elicited positive investor response and partly to borrowings from the domestic market.