Oman's Financial Sector: Paving the Way for Future Economic Prosperity.

Overview

Country Perspectives Brief: Oman's Financial Sector: Paving the Way for Future Economic Prosperity Prepared by Mazhar Pasha

Syndicate Capital's Country Perspectives Brief offers foundational documentation for our ongoing analysis of Oman's economic and financial sector landscape. This report reflects the latest insights and data available, providing critical perspectives on Oman's growth opportunities, challenges, and policy considerations. Published independently as Syndicate Capital's Country Report, it offers valuable insights into Oman's economic outlook and financial sector developments.

Abstract

Oman's Vision 2040 and the Evolution of its Financial Sector

Oman's Vision 2040 outlines a strategic shift from reliance on hydrocarbons to a diversified, sustainable economy driven by the private sector. This transformation necessitates a robust, inclusive financial sector capable of supporting innovation and economic diversification. As Oman transitions, its financial landscape must adapt, offering innovative solutions to meet the evolving needs of businesses and entrepreneurs. This paper evaluates Oman's financial sector development, highlights areas for enhancement, and recommends policy measures to foster continued growth and financial inclusion in alignment with Vision 2040.

Oman's economy has historically been driven by its oil sector since oil's discovery in 1964. Government policies on privatization and Omanization have aimed to diversify the economy, significantly boosting GDP per capita over the past five decades. Oil remains critical, accounting for 64% of export revenue, 45% of government income, and 50% of GDP. In addition to oil, the cement industry plays a crucial role in Oman's economy, supporting urbanization and infrastructure development while providing significant employment opportunities.

Despite these strengths, challenges persist, particularly in the financial sector. Private sector credit remains limited, with private sector credit accounting for only 55.4% of GDP in 2022, one of the lowest in the GCC. The non-bank financial institution (NBFI) sector, though growing, remains modest, primarily comprising pension funds and select insurance companies. Capital markets also exhibit limited size and liquidity, with minimal non-resident involvement due to regulatory constraints and the absence of a market-making system.

The Omanisation programme, launched in 1999, aims to replace expatriate workers with trained Omani personnel to meet the employment needs of a growing national population. While progress has been made, challenges include wage differentials between expatriates and locals, low-paying private sector jobs, and difficulties placing Omanis in senior positions.

Overall, Oman's financial sector is poised to drive future economic growth, supported by strategic policies and a focus on innovation and inclusivity. The continued development of a resilient financial sector will be crucial for achieving the objectives of Vision 2040 and ensuring long-term economic prosperity.Oman's Financial Sector