Oman joins bailout bandwagon by allocating $2 billion

Oman’s central bank yesterday jumped onto the bailout bandwagon allocating about $2 billion (Dh7.34bn) to lend to local banks and ease credit crunch in the country’s financial sector, its governor said yesterday. « We encourage banks to acquire the liquidity from each other or from foreign banks but in case they fail to acquire the liquidity we are willing to lend to them » Hamood Al Zadjali told Al Arabiya television. « We have allocated about $2bn, » he added. The central bank will lend at an interest rate of Libor plus 150 basis points. The central bank said it would provide dollar liquidity to banks in the Gulf state to make up for shortages caused by the global financial crisis. A central bank statement carried by the agency said the plan was in response to the « current situation on world markets » and includes dollar loans of one to three months by the central bank, as well as measures to make foreign exchange transactions smoother. The bank said the liquidity can be used only to fund local projects, pay back the depositors of hard currency, or service foreign loans that are due and cannot be extended. The plan has been launched together with the finance ministry. The global financial crisis has prompted Gulf Arab states to enact a slew of policy responses to combat tight liquidity conditions in markets and sagging investor confidence. The other five members of the oil-rich GCC have already pledged to stand by their banking sectors as the global financial crisis bites. Agencies