Oman said Wednesday it had no plans to depeg its currency from the US dollar though it is one of the main causes of inflation in the Gulf nation.
Central Bank of Oman Executive President Hamoud bin Sangour Al Zedjali said the decline in the dollar against major currencies had made Oman's import bill costlier but had also encouraged foreign investment in the Sultanate.
Quoted by the Omani Al Watan Arabic language newspaper, Zedjali said Oman decided to peg the rial to the dollar in 1973 becasue oil is priced in dollar.
"The fixed currency exchange rate system adopted by the Sultanate has proved successful as it has achieved stability in the country's financial position. It has also encouraged foreign investments enter Oman… so we are not thinking at present of changing this system."
Oman and four other Gulf Co-operation Council (GCC) states – UAE, Saudi Arabia, Bahrain and Qatar – peg their currencies to the dollar while Kuwait quit that system last year and opted for a basket of currencies, in which the greenback is the main component.
GCC states have come under pressure over the past year to drop that link or appreciate their currencies against the dollar as part of measures to curb soaring inflation rates that have climbed to double digit levels in some members.
GCC officials believe the decline in the dollar is a temporary problem and it would recover once the weakening US economy regains strength. They have also ruled out any effect on their plans to create a landmark monetary union in 2010, which Oman quit last year.
While the drop in the dollar has aggravated inflation in the region, Oman believes it has also benefited the economy by making its exports more competitive.