Qatar Central Bank’s foreign reserves, liquidity rebound from sanctions hit
Official data shows that the Qatar Central Bank’s (QCB) international reserves and foreign currency liquidity rebounded in August after falling steeply for two months because of sanctions imposed by other Arab states, reported Reuters.
The reserves and liquidity, a measure of the QCB’s ability to support the Qatari Riyal, recovered to $39bn in August from $36.1bn in July. In May, just before the sanctions, they had stood at $45.8bn.
The central bank did not say why they rebounded, but bankers believe the government may have used money from Qatar’s sovereign wealth fund to replenish the reserves. The central bank’s holdings of foreign securities continued shrinking in August but its balances with foreign banks rose sharply.
Saudi Arabia, the United Arab Emirates, Bahrain and Egypt cut diplomatic and transport ties with Doha on June 5, prompting banks and investors from those countries to withdraw billions of dollars from Qatar. This put the central bank’s reserves under pressure.
Regardless of the current level of the central bank’s reserves, most analysts believe Qatar can defend its currency almost indefinitely because it could keep replenishing the reserves by liquidating assets in its sovereign wealth fund.
The fund, the Qatar Investment Authority, is believed to have had assets of about $300bn at the start of the diplomatic crisis, and within that total, liquid foreign assets may have amounted to $180bn or more.
Pressure on the reserves is expected to ease in coming months as institutions in the four Arab states complete their bank deposit withdrawals from Qatar and no longer have much money left in the country to pull out.
