OMAN STANDS FIRM ON DOLLAR

UNCLAS MUSCAT 000727 SIPDIS SENSITIVE SIPDIS STATE FOR NEA/ARP, EEB/IFD/OMA, EEB/CBA TREASURY FOR VALVO COMMERCE FOR ITA/COBERG E.O. 12958: N/A TAGS: EFIN ECON PREL MU SUBJECT: OMAN STANDS FIRM ON DOLLAR REF: A. MUSCAT 522 ¶B. MUSCAT 216 ¶C. MUSCAT 56 ¶1. (U) Responding to Kuwait's recent decision to revalue the dinar against the dollar, Mohammed Nasser al-Jahadhmy, Executive Vice President at the Central Bank of Oman, stated to the media on July 26 that the government did not intend to revalue the Omani rial (RO),which is currently pegged to the U.S. dollar at the rate of USD 2.67 to 1 RO. "We are comfortable with our exchange rate," Jahadhmy replied. Noting that the dollar's slide was simply a "phase," the Omani banker predicted that "it will come back." ¶2. (SBU) Comment: Jahadhmy's public statement in support of the dollar reflects the Omani government's continued firm stance in maintaining its peg at the current rate of exchange, as reported reftels. Omani central bankers do not appear to be overly concerned about the dollar's fall against other major currencies, even in the wake of "imported inflation" grumbling from Omanis that the policy is resulting in higher prices on European consumer products. U.S. exporters stand to gain market share in Oman from the maintenance of the currency peg, which has made their big-ticket items such as machinery and automobiles more attractive to Omanis. Local contacts, in fact, have noted an increase in sales of U.S.-made sport utility vehicles at the expense of foreign competitors. The currency peg may also assist Oman in attracting more European tourists, though constraints on hotel room and airline seat inventories may keep prices high. End comment. GRAPPO