Oman's Broad Money Supply Surges 12.7% to OMR28.6 Billion

The Sultanate of Oman's broad money supply recorded a significant 12.7 percent annual increase, reaching OMR28.6 billion by the close of May 2026. This substantial growth reflects the total amount of currency in circulation and demand deposits within the Omani economy, signaling a strong expansion in liquidity across the Sultanate. The increase shows dynamic shifts within the nation's financial landscape, influencing economic activity and investment. This broad money supply figure encompasses various forms of monetary assets, providing a full view of the financial system's capacity.

Components of Monetary Expansion

A closer examination of the components contributing to this expansion reveals distinct trends. Narrow money, which is defined to include currency in circulation and demand deposits, registered a notable 26.9 percent increase during the period. This component of the broad money supply reflects highly liquid assets within the financial system, representing funds readily available for transactions and immediate spending. The considerable rise in narrow money indicates an enhanced level of transactional liquidity within the economy.

Conversely, quasi-money, a broader category comprising time and savings deposits in Omani rials as well as foreign currency deposits, expanded by 7.1 percent. While still representing growth, its rate was more moderate compared to narrow money, suggesting varying rates of accumulation across different types of monetary assets. These components collectively illustrate the underlying structure of Oman's monetary expansion.

An analysis of the specific elements within these categories further indicates that cash held by the public grew by 12.1 percent during the period. This increase in physical currency in circulation suggests heightened consumer activity or precautionary holdings. Demand deposits also experienced a significant rise, increasing by 29.8 percent. The substantial growth in demand deposits notes increased funds held in easily accessible bank accounts, which can be rapidly converted into cash or used for payments. These figures contribute to the overall expansion observed in Oman's broad money supply, demonstrating a widespread increase in monetary aggregates. The increases in both narrow money and quasi-money highlight different aspects of liquidity growth within the Sultanate's economy, pointing to a healthy flow of funds through various channels.

Declining Interest Rate Environment

The financial reporting also detailed a declining trend in interest rates across various segments. The weighted average interest rate on Omani Rial deposits registered a decrease, falling from 2.708 percent in May 2025 to 2.366 percent in May 2026. This decline reflects a broader trend in the interest rate environment, potentially encouraging savings or indicating abundant liquidity within the banking system. Similarly, the weighted average interest rate on Omani Rial loans also experienced a reduction, moving from 5.551 percent in May 2025 to 5.327 percent by May 2026. These figures indicate a general easing in lending and deposit rates within the Sultanate, which can stimulate borrowing and investment.

Further illustrating the shifting rate landscape, the average overnight inter-bank lending rate dropped to 3.375 percent in May 2026. This compares to a rate of 4.394 percent recorded in May 2025, showing a notable reduction in short-term liquidity costs between banks. This decrease suggests that banks are finding it less expensive to borrow funds from each other on a short-term basis, signaling ample liquidity in the inter-bank market. Additionally, the weighted average interest rate on repurchase operations also saw a decrease, settling at 4.250 percent in May 2026. This represents a decline from the 5 percent rate observed during the same period last year, further reinforcing the trend of lower borrowing costs within the financial system. These reductions across key interest rate indicators point to a deliberate monetary policy stance or a response to prevailing economic conditions.

Policy Alignment and Outlook

The decline in inter-bank lending rates within Oman aligns with the policies implemented by the US Federal Reserve. This alignment suggests a coordinated approach or a response to international monetary trends, particularly given the Omani Rial's peg to the US dollar. The Central Bank of Oman often considers the US Federal Reserve's decisions in its own monetary policy formulations to maintain exchange rate stability and manage liquidity effectively within the Sultanate. The peg necessitates that Oman's monetary policy broadly tracks that of the US to prevent significant currency fluctuations. Such developments typically reflect broader economic strategies aimed at fostering a stable financial environment and supporting economic growth through accessible credit and controlled inflation. The consistent growth in broad money supply, coupled with a decreasing interest rate environment, suggests a supportive monetary policy designed to bolster economic activity.