Given the fixed peg, the monetary and credit conditions in the system evolve in relation to demand for money and credit. The overall surplus/deficit in the Balance of Payments, and the resultant equivalent change in the net foreign assets of the CBO, largely determines the Reserve Money stock in the system. The pattern of GDP and fiscal expenditure, and the corresponding changes in the levels of aggregate demand, broadly determine the stock of Broad Money and Credit in the economy. Despite the implied constraint on independent conduct of monetary policy because of the fixed peg, the CBO is able to anchor the monetary and credit conditions through the use of monetary, credit and regulatory measures, depending on domestic economic developments and needs.
The interest rate structure in Oman is determined by the market forces in a deregulated environment, and the movement of LIBOR. The CBO sets only the interest rate ceiling on personal loans, which is changed from time to time depending on the developments in the economy.