By Daliah Merzaban
Repurchase rate has risen 79 basis points to 4.28 percent this week, central bank says.
Oman's central bank said on Wednesday its benchmark repurchase rate had risen by 79 basis points this week due to tighter liquidity but banks still had adequate funds to meet their lending needs.
Oman's central bank, which determines monetary policy at a weekly auction of certificates of deposit, set the repurchase rate at 4.28 percent for the week starting on Wednesday compared with 3.49 percent last week.
"Our internal benchmark in the last two weeks indicates that there is a shortage of liquidity in the market so the demand for a higher repo rate is justified," Mohammed Al-Jahdhamy, the Omani central bank's executive vice-president, told newswire Reuters.
"Local banks do not have that liquidity problem to seek extra funds. If that scenario comes, then the central bank will make the funds available according to the existing instruments."
The Omani repurchase rate has fluctuated only slightly around 3.4 percent since May.
Interbank market rates have been rising across the Gulf Arab region as available funds are hit by global financial turmoil and because investors have pulled back bets that Gulf states could revalue their dollar-pegged currencies.
The United Arab Emirates central bank on Monday said it would launch a 50 billion dirham ($13.62 billion) funding facility for banks to help them cope with the liquidity squeeze.
The move prompted calls for other Gulf states to intervene to improve liquidity conditions.
Credit growth in the booming Gulf region has been soaring as banks finance multi-billion-dollar infrastructure, real estate and industrial projects. Regional banks, too small to keep up with demand on their own, have relied heavily on external funding sources. (Reuters)