The sultanate has made ‘substantial progress’ in diversifying its economy and implementing Oman Vision 2040, according to International Monetary Fund (IMF).

The IMF has taken cognizance of Omani authorities’ ‘decisive actions’ through a multi-pronged diversification agenda, including significant investments in renewable energy, green hydrogen and a national strategy for a smooth transition to net-zero emissions.

In its staff report on the Article IV Consultation on Oman released on Monday, the IMF stated, ‘Oman has made substantial progress in strengthening its fiscal and external positions and implementing Oman Vision 2040. Sustained efforts to implement Oman Vision 2040 are progressing.

‘Underpinned by Oman Vision 2040, efforts to strengthen the social safety net, energise labour markets, build fiscal frameworks, overhaul the state-owned enterprise sector, enhance the monetary policy framework, and further develop the financial sector are ongoing.’

The IMF highlighted the fact that Oman’s diversification efforts have yielded significant results over the past two decades. Going forward, maintaining the reform momentum will be crucial for building resilience and enhancing prospects for more inclusive, diversified and sustainable growth.

‘Oman has made progress in diversifying its economy, although non-hydrocarbon growth has remained subdued due to declining total factor productivity. Steadfast progress on reforms aimed at enhancing the quality of institutions, reducing the state footprint in the economy, and improving the business environment would, as envisioned in Oman Vision 2040, strengthen the country’s resilience to oil price volatility, empower the private sector and increase foreign investment.’

Strengthening social protection

The IMF commended Oman for making ‘significant strides’ in strengthening social protection and modernising labour regulations, paving the way for a more inclusive and socially protected labour market.

Last year, Oman enacted a comprehensive social protection law aimed at strengthening social safety nets, enhancing flexibility and inclusiveness in the labour market, and reinforcing the sustainability of the pension fund.

‘These benefits will help alleviate the impact of ongoing fiscal reforms on the vulnerable. At the same time, the new law transforms the current pension system from 11 fragmented pension funds into a single unified pension scheme, with broader implications for the flexibility of the labour market and sustainability of the pension fund,’ the IMF stated.

It specifically noted that equalising pension benefits and entitlements across all sectors will allow for greater labour mobility between the public and private sectors.

‘Reducing and aligning early retirement and adopting dynamic pension adjustment mechanisms that adapt to changing demographic and economic conditions, as stipulated in the new law, will help enhance labour market participation and strengthen the sustainability of the pension fund.’

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