Muscat – The International Monetary Fund (IMF) said that economic scarring appears modest thus far in Oman, though this could change if the COVID-19 pandemic is prolonged.
The policy support measures implemented by the authorities have helped contain bankruptcies in the sultanate’s hard-hid sectors, the IMF noted in its Article IV Consultation Staff Report.
‘Coordinating COVID-19 policy support measures and structural reforms, announced as part of the Economic Stimulus Plan (ESP), would help minimise the long-term scars on the economy. However, the pandemic and collapsing oil prices in 2020 have exacerbated vulnerabilities, including intensifying corporate-bank-sovereign interlinkages,’ the fund said.
It said that the financial performance of Oman’s non-financial corporates has deteriorated in recent years, with declining profitability, increasing leverage, and rising debt service for selected sectors.
‘While policy support measures should continue to be in place or even scaled up until recovery firmly takes hold, measures should be targeted and time-bound to viable firms,’ the IMF said.
The IMF acknowledged the updated Bankruptcy Law and stressed exploring the scope for further strengthening insolvency and debt restructuring tools to facilitate smooth resource reallocation.
It said, ‘The authorities undertook decisive measures to limit the impact of the pandemic on the economy. Fiscal, monetary, and financial measures were deployed to ease the burden on households, firms, and banks.’
‘The authorities emphasised that near-term policies will be guided by the ESP. They expressed their cautious approach to phasing out policy measures, while supporting vulnerable households and affected sectors. To mitigate risks from the withdrawal of support measures, timing and calibration of exit measures are being carefully coordinated among government entities,’ the fund said.