Mubasher: Moody's Investors Service expected that the volume of Omani bank’s funding and liquidity would remain low in the next year and a half due to the declined oil prices.

Given Oman’s high oil breakeven point, $85 per barrel (pb), the tightness of finance will endure, Moody’s said.

“Project financing, corporate expansion, and strong mortgage demand are driving lending growth, but deposits - primarily from the government - will lag,” analyst at Moody's, Mik Kabeya, noted.

Smallest banks in the GCC country will be more vulnerable to the increase in funding costs and the decline in profits, the analyst added.

“Banks are likely to respond by paying more for local currency deposits, increasing their lending rates, lending more selectively, and raising foreign-currency funding,” Moody’s remarked.

Due to its large dependency on oil, the Omani economy suffers tighter liquidity conditions, which is not helped by the banks’ dependence on government deposits.

The Omani government is expected to retain its major deposits in the banking system.

However, the increase in the country’s debt is posing a risk on its ability to lure foreign investments.