“The central bank remains firmly committed to maintaining the parity and peg of the Omani rial to the US dollar,” Hamood Sangour al-Zadjali, Oman’s central bank governor told Reuters in a written response to questions.
“For an open economy like Oman, the fixed peg to the US dollar works as the strongest source of stability, which is very essential for promoting trade and investment,” said Zadjali, who is executive president of the Central Bank of Oman.
Like Saudi Arabia and Bahrain, Oman has held back from lowering interest rates to match the September 18 cut in the US, saying domestic economic considerations need to take precedence in deciding monetary policy.
The moratorium has fuelled speculation that some Gulf Arab states, like Saudi Arabia and the United Arab Emirates, will allow their currencies to appreciate to offset the declining value of the dollar against the world’s major units.
Gulf currencies, including Oman’s rial, have hit several-year highs this month.
The Omani rial hit a more than four-year high of 0.38346 on September 6 and the Saudi riyal a 21-year high last week, according to Reuters data.
Gulf Arab states are battling to bring down inflation that has soared to near record highs as a second bumper year in oil revenue on the back of record prices fuels economic growth.
Omani inflation accelerated to 5.98% in the year to July, the highest this year.
“Although rising inflation is a matter of concern, the levels are still considered to be moderate when seen in relation to the high growth being witnessed in the economy, and when compared within the region,” Zadjali said.
