Qatar’s foreign reserves, liquidity drop in September

The Qatar central bank’s international reserves and foreign currency liquidity dropped. (Shutterstock)

The Qatar central bank’s international reserves and foreign currency liquidity dropped in September, in a sign of capital outflows caused by sanctions imposed by other Arab states.

The reserves and liquidity, a measure of the central bank’s ability to support the riyal currency, fell to $35.6 billion in September from $39.0 billion in August, official data showed on Tuesday.

Qatar’s intransigence with its Gulf neighbor has become a source of concern at various economic financial activities, including the reluctance of the financial authorities to issue international dollar bonds, possibly fearing a raise in the light of uncertainty.

Strong pressure on the riyal

The crisis has put pressure on the Qatari currency and the country has had to spend its reserves to maintain the value of the riyal against the dollar.

Qatar pumped money into its banks to offset large capital inflows in June and July.

Moody's estimates that about $30 billion has been removed from the banking system in those months, with the possibility of more withdrawals.

Issuance of international bonds

In the past, Qatar has relied heavily on Saudi Arabia and the UAE for the majority of its imports, which include a third of its food supplies. It also imported most building materials from both countries.

Qatar issued $9 billion worth of bonds in June last year for 5, 10 and 30 years, but the decision by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt to cut diplomatic ties and transport lines with Qatar in June is obscuring Qatar's use of the international bond market.

Data showed that Qatar's international reserves and liquidity of the hard currency fell sharply after the boycott was imposed.

Bankers say this may be due to monetary supply from the sovereign wealth fund, which has enough liquidity to support the balance of payments (B.O.P) for years.

(With Reuters)

Last Update: Wednesday, 20 May 2020 KSA 09:52 - GMT 06:52