(MENAFN- Gulf Times)
With the planned increase in its liquefied natural gas production taking shape, Qatar's overall growth is not expected to be affected in the medium term by the blockade imposed on it by a coalition led by Saudi Arabia, a Qatari central banker has said.
Qatar has hundreds of billions of dollars of financial reserves that could be used to support its banks to counter possible capital outflows, Khalid Alkhater (pictured) said.
'We do have deposits from Saudi Arabia and the UAE in the range of $15bn to $20bn with a one-year range of maturity, he said. 'We do not expect it to roll over. The amount is very small and manageable.
Alkhater added, 'I suggested among other measures that if the blockade countries withdraw their deposits or freeze Qatari assets, we retaliate by doing the same. The government can also increase its deposits with local banks if needed.
Qatar could also benefit from measures adopted in the past by central banks around the world to deal with capital outflows, such as strengthening prudential regulations and guaranteeing customer deposits up to a certain limit, Alkhater said.
Despite the Qatari riyal's peg of 3.64 to the US dollar, the riyal traded slightly lower between offshore banks in the weeks after the diplomatic crisis erupted, but Alkhater said this was not a worry.
'The Qatari riyal offshore markets are not that significant since supply of the riyal in these markets is very limited.
They shouldn't be a source of much worry, but only to the extent that they can affect the spot market, he said. 'There is no reason to make any change to the peg.
Qatar's inflation climbed to an annual 0.8% in June from 0.1% in May as the sanctions raised some import costs.
'Prices could see an increase in some of the items affected by the sanctions due to re-routing of supply lines, shipping costs, or price increases from the sources, Alkhater said. 'This is generally a cost-push inflation in the possible range of 1% or slightly above...There is not much room to pressure the economy through trade sanctions and the effect will be limited, he said, noting that there was little cross-border trade between Gulf Arab countries.
Asked if the central bank now needed to conduct a more independent monetary policy to deter possible capital flight, Khalid Alkhater said by phone from Qatar, 'That depends on an internal assessment at the central bank. However, it is technically possible should the monetary authority decide to do so...such as raising the interest rate on deposits in addition to other precautionary measures.
Alkhater, an architect of Qatar's monetary policy during the 2008 global financial crisis, is currently on a sabbatical from the central bank while doing research at Britain's University of Cambridge.
He stressed that his views did not necessarily reflect the official line of the central bank.
But if Qatar does diverge from US monetary policy, it would not be doing so for the first time, he noted.
In 2008, the Qatar Central Bank decided not to follow an unprecedented string of rate cuts by the US Federal Reserve that brought its policy rate close to zero.
Instead, Qatar kept its own deposit rate much higher at 2% for over two years, helping to stabilise the money market and reducing double-digit inflation.
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