In 2024, a series of reforms and initiatives have been launched in the Sultanate of Oman, aiming to enhance financial sustainability, inclusivity, and resilience in the face of global economic challenges.

Establishment of Financial Services Authority

The issuance of Royal Decree No. 20/2024, which established the Financial Services Authority (FSA). This new entity is designed to reorganize the financial services system in Oman, enhancing the integrity and independence of the financial sector. The FSA will now regulate a wider array of financial sectors, including the accounting and auditing profession, capital markets, and insurance, reflecting a comprehensive approach to financial oversight.

The new law paves the way for sector-specific legislation, aiming to create special laws and regulations tailored to the unique characteristics of each sector. This structural reform is crucial for integrating the financial sector into the national decision-making process and promoting an environment conducive to investment and economic diversification.

As part of the ongoing reforms, the FSA aims to strengthen its regulatory and supervisory roles, enabling the development of national capacities and human capital within specialized sectors. By nurturing a robust financial sector, Oman aspires to create a thriving ecosystem that not only supports economic diversification but also enhances international cooperation and investment.

National Programmeme for Financial Sustainability (Estidamah)

In tandem with the establishment of the FSA, the National Programmeme for Financial Sustainability and Financial Sector Development (Estidamah) has unveiled an ambitious roadmap designed to propel Oman’s financial sector into a new era. This initiative, led by the Ministry of Finance, comprises over 74 transformative initiatives grounded in six key pillars and supported by four critical enablers.

The programmeme aims to achieve demonstrably positive outcomes by 2025. The government’s commitment to strengthening financial indicators and advancing the financial sector is evident in the remarkable progress made since the implementation of the 2020-2024 medium-term financial plan, which successfully reduced the average oil break-even price and public debt while securing a credit rating upgrade.

SMEs funding set to increase

A core objective of Estidamah is enhancing access to finance for small and medium enterprises (SMEs). The financial sector’s development is essential for fostering entrepreneurship, innovation, and job creation, particularly as the economy shifts away from hydrocarbon dependence. The Omani government aims for a loan allocation of 5.5% for SMEs from the total banking portfolio by 2025. Initiatives include enhancing the Development Bank’s role and establishing a venture capital fund to support the growth of SMEs, thereby stimulating economic diversification.

Dr Said bin Mohammed al Saqri, Minister of Economy, announced that 19 developmental initiatives aimed at bolstering financial sustainability have been approved for implementation in 2024. With a total investment of around RO 49 million, these initiatives, including 11 focused on leveraging Artificial Intelligence, will enhance efficiency across economic sectors and support the broader goals of the 10th Five-Year Plan.

The International Monetary Fund (IMF) has underscored the need for a well-developed and inclusive financial sector as Oman progresses towards its Vision 2040 objectives. In its recently released ‘Selected Issues Paper’, the IMF outlined the importance of establishing a financial sector capable of supporting the evolving economic landscape characterized by entrepreneurship and innovation.

To facilitate this, the IMF recommended measures to foster the growth of a “deeper, more liquid, and larger financial sector,” emphasizing the need for structural financial sector reforms. The development of local currency government bond markets and enhancements to market liquidity are critical steps proposed by the Fund. Furthermore, the IMF advocates for public listings by state-owned enterprises (SOEs) to boost the equity market and attract a broader investor base, thereby stimulating growth in the banking sector.

Additionally, the government is focused on improving access to finance for SMEs and promoting fintech solutions, which can significantly contribute to financial sector deepening. The IMF’s paper emphasized the potential for fintech businesses to complement the development of debt capital markets, ultimately reallocating bank funding to support the growth of SMEs and the non-hydrocarbon sector.

As the Sultanate of Oman continues to implement these reforms, the coming years will be crucial in shaping a resilient financial sector that supports the long-term economic aspirations.

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