Tue, 31 Jan 2023 Today's Paper

Qatar debt rating downgraded by S&P as riyal hits 11-year low

9 June 2017 09:51 am - 0     - {{hitsCtrl.values.hits}}

A A A

Standard & Poor’s downgraded Qatar’s debt on Wednesday as the riyal currency fell to an 11-year low amid signs that portfolio investment funds were flowing out of the country because of Doha’s diplomatic rift with other Arab states.
S&P cut its long-term rating of Qatar by one notch to AA- from AA and put the rating on CreditWatch with negative implications, meaning there was a significant chance of a further downgrade.
The rating agency said Qatar’s economy would suffer from the decision on Monday of Saudi Arabia, the United Arab Emirates, Egypt and Bahrain to cut diplomatic and transport ties with Doha. They accused it of supporting terrorism, a charge that Qatar denies.
“We expect that economic growth will slow, not just through reduced regional trade, but as corporate profitability is damaged because regional demand is cut off, investment is hampered, and investment confidence wanes,” S&P said.
Another major rating agency, Moody’s Investors Service, assesses Qatar at Aa3, which is equal to S&P’s new rating. Fitch Ratings puts Qatar at AA.
The U.S. dollar was bid as high as 3.6526 riyals in the spot market on Wednesday, its highest level since July 2005, according to Thomson Reuters data. The riyal is pegged at 3.64 to the dollar by the central bank, which only allows small fluctuations around this level.
In the offshore forwards market, which banks use to hedge against the risk of future moves in the spot rate, the riyal dropped as far as a 550-point premium against the dollar, its lowest level since December 2015, when tumbling oil and gas prices were raising doubts about the future of Gulf economies.
The low in the forwards market only implied the riyal would depreciate about 1.5 percent in the next 12 months. But it showed there were expectations of substantial outflows of money from Qatar in coming months.
Qatar’s stock index has tumbled 9.7 percent over the past three days, with high trading volumes suggesting some Gulf and international investors were bailing out of the market and sending their money home.
Before this week’s crisis, Gulf and international investors held only about 9 percent of Qatar’s stock market, which had a capitalisation of about US $150 billion, bourse data showed.

Even if all that foreign money flowed out, which is unlikely, it would probably not be enough to exert overwhelming pressure on the riyal to depreciate. Qatar remains one of the wealthiest countries per capita in the world, with an estimated $335 billion of assets in its sovereign wealth fund, and its liquefied natural gas exports are raking in a trade surplus of about $2.7 billion every month.
These exports are expected to continue despite the sanctions. A Qatari central bank official told Reuters on Tuesday that the country had huge foreign reserves that it could use to support its currency if needed.
Nevertheless, as S&P noted, Qatar’s banking system has in recent years become more dependent on loans and deposits from Gulf and international banks, and it could face a major outflow if that money is withdrawn because of diplomatic tensions.
The foreign liabilities of Qatari banks ballooned to 451 billion riyals (US$124 billion) in March from 310 billion riyals at the end of 2015, Central Bank data shows.

 


Order Gifts to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Vegetables, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Sending Money,Online Books, Delivery Service, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop Sri Lanka

  Comments - 0

Order Gifts to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Vegetables, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Sending Money,Online Books, Delivery Service, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop Sri Lanka

Add comment

Comments will be edited (grammar, spelling and slang) and authorized at the discretion of Daily Mirror online. The website also has the right not to publish selected comments.

Reply To:

Name - Reply Comment




Order Gifts to Sri Lanka. See Kapruka's top selling online shopping categories such as Toys, Vegetables, Grocery, Flowers, Birthday Cakes, Fruits, Chocolates, Clothing and Electronics. Also see Kapruka's unique online services such as Sending Money,Online Books, Delivery Service, Food Delivery and over 700 top brands. Also get products from Amazon & Ebay via Kapruka Gloabal Shop Sri Lanka

Health System in the emergency room

Sandya Kumari from Kotahena has been experiencing chest pains since 2015 and

Canada’s targeted sanctioning of Gota and Mahinda

History was made last week when two former executive presidents of Sri Lanka

SC judgement on Easter attack: Court rules negligence stood in the way of avoiding most heinous crime

“On the ill-fated day of 21st of April 2019, this island home was awoken ru

Lasantha was a Fearless Editor who Spoke Truth to Power

Friends,Family members, colleagues, schoolmates and admirers of Lasantha Wick