Oman’s Next Test: How Credit Growth Strategies Will Impact Your Business and Investments
MUSCAT, JAN 19 — The International Monetary Fund (IMF), in its latest Article IV consultation released in January 2026, highlights that Oman’s next critical reform challenge is not the mere growth of credit but rather its quality, allocation, pricing, and the financial system’s resilience amid a softer oil market. The IMF stresses the importance of supporting Oman Vision 2040 without compromising economic stability in Muscat and across the country.
The IMF offers a broadly positive outlook: Oman’s economy grew by 1.6% in 2024 and accelerated to 2.3% year-on-year in the first half of 2025, driven primarily by nonhydrocarbon sectors. Inflation remained low, at 0.9% for January–October 2025, up slightly from 0.6% in 2024. Fiscal discipline continues, with an estimated overall surplus of 0.7% of GDP in 2025 and central government debt falling to 36.1% of GDP by September 2025. However, the external environment softened, with the current account posting a deficit of 1.1% of GDP in 2025 due to weaker oil prices.
For businesses, the IMF’s key insight lies in its focus on the institutional framework—what it terms the “operating system” behind these headline numbers. This includes whether firms can reliably access finance, whether banks price risk appropriately, and whether liquidity conditions remain stable under Oman’s currency peg. The Fund underscores that sustainable resilience is built through sound policies that prevent boom-bust credit cycles rather than relying on one strong economic year.
The IMF confirms that Omani banks are well-capitalized, liquid, and profitable, a finding supported by the Financial Sector Assessment Programme. Nonetheless, it cautions against the common policy temptation during transitions of encouraging rapid credit expansion without commensurate risk governance. The IMF Executive Board emphasizes that the Central Bank of Oman’s expanded development role must remain firmly anchored to maintaining price and financial stability.
This cautionary note has real-world implications for lending practices. If banks misinterpret development goals as a reason to underprice risk or loosen credit standards, asset quality problems are likely to surface during tighter liquidity periods, raising costs and constraining finance. This scenario poses a risk especially for SMEs, contractors, and emerging non-oil sectors, which may face abundant credit in good times but sudden scarcity just as working capital needs grow. The IMF’s call for enhanced macroprudential measures, stricter supervision, and stronger crisis management is thus directly linked to business confidence and investment planning.
The IMF’s timing aligns with its oil price assumptions—an average crude price of $70.6 per barrel in 2025, falling to $62.1 in 2026—while projecting real GDP growth of 2.8% in 2025 and 3.8% in 2026-27, with continued strong nonhydrocarbon expansion. This environment of steady diversification amid softer oil prices underscores the critical need for robust institutions to ensure sustainable progress independent of hydrocarbon cycles.
One of the IMF’s more technical but crucial recommendations for businesses is the implementation of a Treasury Single Account and advancement towards active liquidity management. The Fund affirms the appropriateness of Oman’s exchange-rate peg and argues that better government cash management would enhance monetary policy effectiveness. Consolidating government cash into a single account would improve visibility and predictability of liquidity, reducing short-term interest rate volatility and uneven funding costs that affect loan pricing.
For businesses, this means more predictable funding conditions, benefiting corporates negotiating credit terms, SMEs managing working capital, and suppliers navigating payment cycles. Even with stable policy rates, day-to-day liquidity influences how banks price loans and how readily they extend credit.
The IMF also urges a focus beyond the headline fiscal surplus to monitor the nonhydrocarbon fiscal stance, citing improvements in the nonhydrocarbon primary deficit as a key sustainability indicator. For businesses, a budget less reliant on oil revenue translates into greater reliability in procurement planning, project development, and payment discipline. The Fund complements this progress with recommendations to strengthen fiscal frameworks, improve public investment management and budget execution, and continue reforms in revenue and subsidy systems.
The overall message to Oman’s private sector is that the next competitive advantage lies in credibility. The IMF acknowledges Oman’s fiscal improvements, healthier debt profile, and a resilient banking system but advises businesses and investors to watch closely how the system evolves. Moving forward, the most relevant commercial signals will come from sustained prudential discipline alongside deeper financial market development and liquidity reforms.
Oman’s reform journey, as outlined by the IMF, is shifting from focusing on economic outcomes to building institutional architecture. Properly constructed, this architecture can reduce uncertainty, stabilize financing conditions, and support long-term investment aligned with Oman Vision 2040—even with less favorable oil prices. Conversely, weak institutional foundations risk short-term credit booms followed by abrupt tightening, undermining diversification efforts.
In summary, Oman’s crucial test is not simply whether capital flows—but whether it moves predictably, transparently, and safely through all economic cycles.
Special Analysis by Omanet | Navigate Oman’s Market
The IMF’s January 2026 consultation highlights a crucial shift for Oman’s business landscape: the focus moves from credit growth volume to credit quality, predictability, and risk management. For businesses and investors, this means opportunities lie in sectors supported by robust financial governance and stable liquidity, while risks grow where credit expansion outpaces risk discipline. Smart investors should prioritize ventures aligned with strengthened macroprudential frameworks and liquidity reforms that ensure sustainable funding and resilience through economic cycles in line with Oman Vision 2040.
