Qatar’s reserves nearly doubled to $39 billion due to the change giving it more foreign-currency liquidity.
Qatar’s central bank made a sudden accounting change in October that nearly doubled the country’s foreign-currency reserves ahead of an important bond sale. The move was based on November 2016 guidance from the International Monetary Fund to add “other liquid assets in foreign currencies” to its reserve holdings.
M.R. Raghu, head of research at Kuwait Financial Center (Markaz), says: “Qatar’s reserves nearly doubled to $39 billion due to the accounting change, whereby they added foreign-currency liquidity to boost the figures. This change is expected to have a positive impact, as it would enable Qatar to price its bonds competitively.”
As Global Finance went to press, Qatar government officials were meeting with bankers on a possible sale of about $9 billion of bonds in international markets. The sale was expected to target investors in Asia, the US and Europe. It would include the refinancing of a $3 billion loan due in March 2018.
The central bank also encouraged local banks to issue bonds internationally in order to avoid a further drain on foreign reserves, which could hurt the country’s credit rating. In September, Qatar National Bank raised $630 million through a Formosa bond issue arranged by Standard Chartered Bank. Formosa bonds are issued in Taiwan but are denominated in currencies other than the New Taiwan dollar.
The Qatar Investment Authority, the state-owned wealth fund, placed billions of dollars of cash with Qatari banks soon after the blockade started, as some banks in the United Arab Emirates, Saudi Arabia and Bahrain began withdrawing funds.
Moody’s Investors Service said in a recent report that Qatar faces large economic, financial and social costs from the travel and trade restrictions imposed by the boycotting countries. In the short term, “we expect tensions to persist, quite possibly to escalate,” the report said. “The severity of the dispute is unprecedented, which magnifies the uncertainty regarding the ultimate economic, fiscal and social impact on the GCC as a whole.”
At Standard & Poor’s, analysts confirmed their negative outlook and said they expect the boycott to lead to slower economic growth and to hamper Qatar’s fiscal performance.
|
REAL GDP GROWTH IN GCC COUNTRIES |
|||
|---|---|---|---|
|
Country |
(Annual change, percent) |
||
|
2016 |
2017* |
2018* |
|
|
Bahrain |
3 |
2.5 |
1.7 |
|
Kuwait |
2.5 |
-2.1 |
4.1 |
|
Oman |
3 |
0 |
3.7 |
|
Qatar |
2.2 |
2.5 |
3.1 |
|
Saudi Arabia |
1.7 |
0.1 |
1.1 |
|
UAE |
3 |
1.3 |
3.4 |
