The unit of currency is the Qatari Riyal (QAR), divided into 100 Dirhams (Dh), issued by Qatar Central Bank (QCB). It is pegged to the US dollar at a fixed exchange rate of USD1 = QAR3.64. Notes in circulation are QAR1, QAR5, QAR10, QAR50, QAR100 and QAR500; coins are Dh5, Dh10, Dh25 and Dh50. Banknotes incorporate security threads, as well as special features for recognition by the blind and visually impaired.
Four GCC countries support the creation of a Gulf Monetary Union (GMU) – Qatar, Saudi Arabia, Kuwait and Bahrain; the UAE and Oman have withdrawn entry. The GCC Supreme Council in 2008 approved the Monetary Union Agreement and the Statute of the Monetary Council. The headquarters of the Gulf Monetary Council opened in Riyadh in October 2013. Monetary union between the GCC countries was proposed in December 2013; subsequently Qatar, Kuwait, Bahrain and Saudi Arabia agreed to establish a unified central bank with a currency pegged to the US dollar. However, there has been no further action since 2013, and this looks unlikely given the blockade which started in June 2017.
The Banking Sector
The Qatari banking sector currently comprises a number of regional, foreign and Islamic banks. The state-owned Qatar Development Bank provides financing to small and medium enterprises, while QInvest focuses on investment banking, asset management and investing its own capital.
Barwa Bank and International Bank of Qatar (IBQ) announced in August 2018 that they had signed a final agreement to merge the two banks – the first merger in Qatar’s banking history – to create a Sharia-compliant financial institution with more than USD22 bn in assets. The legal merger was completed in April 2019 and the new entity will trade as Barwa Bank. As such, IBQ products are being converted to Sharia-compliant equivalents.
Meanwhile, new institution Energy Bank will launch with a targeted capital of USD10 bn to fund hydrocarbon projects across the world. The Qatar Financial Centre-based bank will progressively scale up its capital base to become the world’s largest Islamic lending institution and follows the end of Qatar’s self-imposed moratorium on the development of new gas projects.
A new loan-to-deposit requirement of 100% came into effect in 2018. The adoption of International Financial Reporting Standard (IFRS) 9 by QCB has strengthened the provision coverage at Qatar’s commercial banks – under the IFRS standard, banks and financial entities have to set aside a certain proportion of profit against losses for unseen reasons. QCB data shows the NPL ratio was3.0% in 2018. QCB also set up the Supreme Emergency Committee in 2018 to monitor the day-to-day activities of financial institutions in the country, addressing emergency matters and easing the flow of work.
The International Monetary Fund (IMF) commented in June 2019 that ‘Qatar’s banking sector remains healthy, reflecting high asset quality and strong capitalisation’ and that ‘Qatar’s economy has successfully adjusted to the dual shocks of lower oil prices and diplomatic rift. Prudent fiscal policy, an appropriate monetary anchor, sound financial regulation and supervision frameworks and considerable buffers continue to underpin strong macroeconomic performance. Increased gas production, a slower pace of fiscal consolidation, infrastructure programmes and adequate credit growth will underpin growth over the medium term.’