While few foreign banks withdrew their funds from Qatari banks, the liquidity injection by the Qatar Central Bank, and increased public sector deposits, have mitigated the impact on the balance sheets, the IIF added.
Highlighting that the authorities in Qatar have taken steps to boost the liquidity of banks, the IIF said despite the decline in non-resident deposits, total deposits still increased by 1.3% from May to July, and the year-on-year (y-o-y) increase in July is still very high at 12.7%. Growth in credit to the economy, however, has decelerated to 2.8% in July, y-o-y, largely due to the continued slowdown in non-hydrocarbon growth, according to it. In July, the IIF had said Qatar’s banks, which are “sound”, have the lowest non-performing loans in the Gulf Cooperation Council and the wider Middle East and North Africa region. It is almost three months since Saudi Arabia, the UAE, Bahrain and Egypt have cut diplomatic ties and transport links with Qatar. But Qatar continues to adjust to the effects of the siege, according to the IIF.
“The sanctions have impacted the flow of people, trade, and capital and delayed the execution of some non-priority projects,” it said, adding imports declined by 30% in the first seven months of this year, as compared with the same period of last year. Finding that the Qatari authorities continue to diversify sources of capital goods and food imports, alleviating the risk of potential shortages; the IIF said to cope with the blockade, Doha has established alternative trade routes. The Omani ports and Iranian airspace are now being used, and Turkey became the main source for food imports. On September 7, the authorities officially opened a major seaport that will allow Qatar to bypass the blockade. In its early comment in June, a few days after the diplomatic stir started, IIF had said Qatar’s fiscal balances may not be majorly impacted if the stir and trade disruptions since 80% of the government revenues comes from hydrocarbons and that Doha has “ample” financial resources and fiscal buffers.