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Qatar deposits $7 billion in July to offset crisis outflows

The rate of decline was roughly the same as in June when the crisis began

Reuters  |  DUBAI 

Qatar flag image via Shutterstock
Qatar flag image via Shutterstock

Qatar's deposited nearly $7 billion in the local system during July to offset a pull-out of funds by banks from other Arab states due to the region's diplomatic crisis, Qatari central data showed on Tuesday.

Foreign customers' at banks in - the vast majority in the form of foreign-currency - shrank to 157.2 billion riyals ($43.2 billion) last month from 170.6 billion riyals in June. The rate of decline was roughly the same as in June, when the crisis began.

But total at banks in rose during July, to 772.5 billion riyals from 770.7 billion riyals, because of a $6.9 billion jump in the Qatari public sector's foreign currency deposits, the data showed. That followed a $10.9 billion injection by the in June.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with on June 5, accusing it of backing terrorism, which Doha denies.

Banks and other institutions from the four countries quickly began pulling from - a threat to the stability of the system, which has relied heavily on foreign money to fuel its rapid growth in the last few years.

Doha responded by having its sovereign wealth fund, the Investment Authority (QIA), deposit fresh funds in its banks - a strategy which seems to be working as interbank money rates, which jumped half a percentage point in the initial weeks of the crisis, have now stabilised.

Fund outflows could continue into next year as Arab banks pull out maturing time deposits, bankers believe. Fifty-five percent of cross-border in Qatar's banks last year were from other nations in the Gulf Cooperation Council.

This implies around 50 billion riyals of remaining Saudi, UAE and Bahraini may flow out in coming months, in addition to a smaller amount of cross-border loans; Qatari banks have been borrowing more from Europe than from the GCC.

looks likely to be able to cope with such outflows. The QIA's liquid assets are estimated at around $180 billion or more, and its banks can replace some of the lost money with or loans from Asia - a big consumer of Qatar's natural gas exports - and Turkey, a diplomatic ally.

Nevertheless, the crisis appears to be causing Qatari banks to rein in their business abroad. Their claims on banks outside the country shrank to 83.9 billion riyals in July from 93.8 billion riyals in June and 102.2 billion riyals in May.

A unit of Qatar's Doha is seeking to sell some of its assets in the UAE, sources told Reuters in early August, a sign that Qatari lenders are reducing exposure to the Gulf's main financial centre because of the political uncertainty.

So far, however, Qatari banks do not appear to be cutting their domestic business. Total domestic credit facilities extended by the banks rose to 795.8 billion riyals last month from 779.7 billion riyals.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, August 22 2017. 18:35 IST