IMF Wraps Up 2025 Article IV Talks with Oman

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for The Sultanate of Oman. [1] This also included a discussion of the findings of the Financial Sector Assessment Program (FSAP) exercise for Oman. [2]

Oman's reform agenda is advancing, strengthening resilience and supporting a favorable economic outlook. Economic growth turned out at 1.6 percent in 2024 before accelerating to 2.3 percent (year on year) in the first half of 2025, supported by expansions in the nonhydrocarbon economy. While OPEC+ production curbs continued to weigh on hydrocarbon output, nonhydrocarbon growth reached 3.5 percent (year on year) in the first half of 2025, reflecting strong activity in construction, agriculture and fishing, tourism, and logistics. Over the medium term, growth is expected to strengthen further as oil production gradually returns to capacity and the nonhydrocarbon economy remains robust, supported by ongoing reforms under Vision 2040 and the rollout of large-scale investment projects. Inflation remained subdued, edging up to 0.9 percent during January-October 2025 from 0.6 percent in 2024, amid contained price pressures across most categories.

Prudent fiscal management has helped maintain the fiscal balance in surplus despite declining oil prices, with the overall balance estimated at 0.7 percent of GDP in 2025. The nonhydrocarbon primary deficit is estimated to have narrowed by 2 percent of nonhydrocarbon GDP in 2025, reflecting expenditure restraint and improved nonhydrocarbon revenue collection. Government debt stood at 36.1 percent of GDP by September 2025. The current account balance is estimated to have turned into a deficit of 1.1 percent of GDP in 2025, weighed down by softer oil prices. The 2025 Financial Sector Assessment Program (FSAP) found the financial sector to be resilient against severe shocks as banks remain sound, with ample capital and liquidity buffers and robust profitability.

Risks to the near-term outlook are tilted to the downside. An escalation of trade tensions and deepening geoeconomic fragmentation would weaken global demand and dampen oil prices, dragging down Oman's economic growth and fiscal and external positions. Renewed regional geopolitical tensions could disrupt trade and dampen tourism and investment. On the upside, higher oil prices could arise from a global growth upturn or intensified geopolitical tensions affecting oil supply, and accelerated structural reforms would bolster confidence and enhance economic diversification.

Executive Board Assessment [3]

Executive Directors agreed with the thrust of the staff appraisal. They commended Oman's economic resilience, underpinned by steady reform implementation under Vision 2040. Directors highlighted the robust expansion of nonhydrocarbon economic activities, alongside the continued strengthening of fiscal and external positions. While noting that the outlook remains favorable, Directors emphasized the importance of sustaining prudent policies and the reform momentum, particularly to continue diversifying the economy and enhance potential growth.

Directors welcomed the authorities' continued commitment to prudent fiscal management and intergenerational equity. They emphasized the need to further advance tax policy and administration reforms, phase out untargeted subsidies while protecting the most vulnerable, and rationalize non-essential spending. Directors also underscored the importance of reinforcing fiscal frameworks as well as governance and transparency, including developing a fiscal rule and strengthening public investment management as well as budget preparation and execution. Consolidating stabilization funds, strengthening debt management, and developing sovereign asset-liability management are key priorities going forward.

Directors agreed that the exchange rate peg remains an appropriate and credible policy anchor for Oman. They stressed the importance of implementing the Treasury Single Account and transitioning to an active liquidity management framework to strengthen monetary policy transmission. Directors also underscored the need to continue to ensure that the Central Bank of Oman's expanded development mandate remains anchored in the objectives of price and financial stability.

Directors welcomed the progress in financial sector reforms and the findings of the Financial System Stability Assessment that the banking system is well capitalized and broadly resilient to shocks. They recommended additional efforts to safeguard financial stability and further develop the financial sector. Directors called for operationalizing a macroprudential strategy, continuing to enhance supervision and regulation, improving AML/CFT frameworks, and further strengthening the financial safety net and crisis management frameworks. They also emphasized the importance of deepening capital markets and addressing structural impediments to SME financing.

Directors welcomed the authorities' strong efforts to advance structural reforms and their continued commitment to transition toward a more sustainable and diversified economy. They called for additional measures to narrow the public private-sector wage gap, increase female labor force participation, and boost educational and vocational training outcomes. Directors recommended improving the business environment, SOEs' transparency, and data provision. They agreed that deeper trade integration as well as advancing digitalization and AI readiness would help develop a competitive nonhydrocarbon tradable sector.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the FSAP, the IMF assesses the stability of the financial system, and not that of individual institutions. The FSAP assists in identifying key sources of systemic risk and suggests policies to help enhance resilience to shocks and contagion. In member countries with financial sectors deemed by the IMF to be systemically important, it is a mandatory part of Article IV surveillance, and supposed to take place every five years.

[3] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .