(updates with Omani denial)
By Fatma Alarimi and Tom Finn
MUSCAT/DOHA Jan 10 Oman is negotiating with
wealthy Gulf Arab states to secure a multi-billion dollar
deposit in its central bank, two sources told Reuters, although
the Sultanate denied the report.
The sources, declining to be named because the matter is not
public, said Omani officials had met in recent weeks with
officials of the finance ministries of Kuwait, Qatar and Saudi
Arabia to discuss the proposed deposit.
The talks are at an early stage but "signs so far are
positive", said an Oman-based source close to the discussions.
He added: "This can lessen the risk of devaluation."
A Qatari official confirmed that negotiations were under
way, saying: "What is being discussed is in the region of
billions of dollars. It is in the collective interest of the
region to keep the exchange rate intact."
But Oman's finance ministry later denied the report, saying
in a statement on Tuesday that the country had "sufficient
reserves and there is no risk to the value of the Omani rial".
"There were no talks to discuss receiving a deposit of
billions (of dollars)," the finance ministry added.
Officials of the finance ministries of Kuwait, Qatar and
Saudi Arabia did not respond to telephone calls and emails
Oman's central bank executive president, Hamood Sangour
al-Zadjali, referred questions to the Omani finance ministry but
said the central bank was encouraging local banks to attract
deposits of foreign exchange.
The proposed Omani deposit would be a fresh effort by the
richer countries in the six-nation Gulf Cooperation Council to
support the less wealthy members in order to prevent financial
instability from spreading around the region.
The finances of all six countries have been hurt by the
plunge of oil prices since mid-2014, which has slashed their
export revenues. Oman, which lacks the huge oil and financial
reserves of its neighbours, has been hit particularly hard.
This has caused speculation among bankers that Oman could
eventually have to abandon its rial currency's three-decade-old
peg of 0.3849 to the U.S. dollar.
Since early 2015, the rial has depreciated in the forwards
market as some banks have hedged against the risk of a
devaluation, although the Omani currency has come well off
forward market lows hit in early 2016.
The Omani central bank's net foreign assets rose 3.2 percent
from a year earlier to 7.40 billion rials ($19.2 billion) in
October, according to the latest official data. Oman is running
a deficit on its trade of goods and services of nearly $13
billion, the International Monetary Fund estimates.
The government is also believed to have about $40 billion of
assets in two sovereign wealth funds, according to private
estimates, but it wants to avoid running these funds down as
they generate long-term income and invest in industries that are
strategically important for Oman's economy.
Geopolitics may contribute to any decision to go ahead with
the Omani deposit. Last month Oman, traditionally on friendly
terms with Iran, said it had joined a Saudi-led coalition of
Muslim countries fighting terrorism, a move praised by other GCC
states as closing ranks with them against Iran.
The Qatari official said the Omani deposit would be separate
from a pledge by wealthy Gulf states in 2011 to provide $10
billion each to Oman and Bahrain to fund economic development
projects in those countries over 10 years. A small fraction of
that money has been disbursed so far.
(Editing by Andrew Torchia/Jeremy Gaunt/Catherine Evans)