Oman to continue with dollar peg, says central bank chief

Author: 
MARTIN DOKOUPIL | REUTERS
Publication Date: 
Tue, 2010-03-16 18:23

"We shall continue to maintain that peg," central bank Executive President Hamood Sangour Al-Zadjali told Reuters on the sidelines of an economic conference.
When asked whether there were any other policy options considered for the currency at the moment, he said: "No."
The non-OPEC producer pulled out of a planned monetary union with Gulf neighbors in 2006, and was followed by the United Arab Emirates in 2009. Kuwait, which runs the six-nation Gulf Cooperation Council (GCC) this year, has made bringing the UAE and Oman back into the union a priority of its presidency.
"It (the union) will certainly bring benefits for the region but as for Oman, it decided not to rejoin," Zadjali said in remarks ahead of a meeting of GCC central bank governors in Kuwait next week.
Monica Malik, chief economist at regional bank EFG-Hermes, said it was beneficial for the GCC countries to hold onto their US dollar pegs.
"The key issue will be any future weakness in the US dollar and a need for GCC countries to develop independent monetary policy," she said.
 

Zadjali gave an upbeat forecast for growth in the sultanate, which weathered the global economic crisis better than richer Gulf neighbors because as a non-OPEC member it was not obliged to join the group's prescribed output cuts.
"It (economic growth) will be very positive for Oman. It will be around 6 percent," he said.
The forecast is higher than analysts' forecast of 4 percent economic growth in Oman when polled by Reuters in January.
Oman's economy minister, also speaking on Tuesday, said Oman expects a budget surplus in 2010 on higher oil prices seen at $60 to $80 per barrel, adding that he was comfortable with current oil price levels.
"From the beginning of the year until today, we have achieved an oil price of $70 per barrel, so I hope we will not face any deficit," Mekki said.
Oman had based its 2010 budget on a projected oil price of $50 a barrel and had expected a deficit.
Zadjali also predicted an uptick in inflation but said it would not be to "a level that would cause any difficulty."
"It will be within expected limits, between 4 to 5 percent," he said.
Mekki forecast in January that 2010 inflation would be at 3.5 percent. Analysts polled by Reuters forecast 2010 inflation at 4 percent.
"We continue to see inflation picking up, driven mostly by housing price increases as Oman continues with their investment program and (due to) the external factors such as a pick-up in global food prices," Malik said.
Oman saw inflation of 3.4 percent in 2009, sharply below 12.5 percent in 2008 as the global economy cooled down.
Data this week showed Oman's inflation accelerated to 1.7 percent year-on-year in January, from 0.9 percent in December.
 

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