Usually, the government mobilises funds by floating development bonds to finance its development expenditure. The government development bonds were first issued in 1991. Up to June 2000, there were 24 issues of government bonds. The yearly amount raised by the government through development bonds rose from RO40 million in 1991 to RO135 million in 1999. The bonds will be issued in the denomination of RO100 and multiples thereof, and will be open for subscription to both the domestic and overseas investors, irrespective of their nationalities.
Banks tend to favour holding of bonds more than T-bills.
However, a limit is imposed on total bank exposure to the government bonds. Until 1994 banks were allowed to invest in government bonds up to 20 per cent of their net worth, which was revised upwards in January 1994 to 30 per cent and remained in force till September 1995 when it was reverted to 20 per cent. Again in February 1999, the limit was raised to 30 per cent. Investors can apply through either the competitive or non-competitive bidding process for these bonds. Bids may be submitted through licenced banks operating in the Sultanate, anytime during the subscription period.