Omani banks have enough liquidity to meet domestic credit needs and their non-performing loans (NPLs) are as low as 1.1 per cent, the Central Bank has said.
But the country’s banks are still tightening their credit lines following the 2008 global fiscal crisis and the exposure of some of them to the debt default problem involving Saudi Arabia’s Saad and Algosaibi family businesses.
“I don’t think the increase in NPLs will threaten domestic economic recovery despite a slight increase in such loans,” said Hamoud bin Senjour Al Zedjali, Executive President of the Central Bank of Oman.
“NPLs increased from around 0.72 per cent at the end of 2008 to 1.1 per cent (of total loans) at the end of 2009. This level is modest compared with international standards and the banks have sufficient liquidity that enables them to support the recovery process easily,” Zedjali told Oxford Business Group.
Zedjali said domestic credit had remained low despite the banks’ high liquidity but noted that the CBO had advised banks to “take extreme care in their activity.”
“We do not see a need to take any measures to spur credit because banks have enough liquidity they can meet domestic demand.”
Asked about inflation, Zejjali admitted the rate has steadily grown over the past few months but dismissed fears that it could surge to the levels recorded in mid 2008, when inflation climbed to an all time high of 13.7 per cent.
He projected inflation in Oman at 3-5 per cent this year, adding:”This will not require any measures but a follow up…inflation in Oman is mostly imported and I believe it will be under control this year.”