Qatar dollar peg to stay for now
Dubai, May 29, 2013
Qatar may change its peg to the US dollar when the economy becomes less dependent on hydrocarbons and local financial markets deepen, although no changes are currently being considered, its central bank chief said.
Asked which economic conditions needed to be met for Qatar to consider changing its currency regime, Central Bank governor Shaikh Abdullah bin Saud Al Thani said, "With increasing integration in international trade, services, and asset markets, a higher degree of exchange rate flexibility may become more desirable to ensure external stability and international competitiveness of our exports."
It was the first time a Qatari policymaker has publicly suggested that the country may one day change its dollar peg, although Shaikh Abdullah emphasised that nothing was currently in the works.
"The dollar peg provides a credible anchor for our monetary policy as almost all of Qatar's export contracts and invoicing are done in the US dollar. Thus, a stable exchange rate renders stability to our foreign export earnings, the main component of government revenue."
Qatar and other Gulf states adopted fixed exchange rate regimes in the past to stabilise their currencies and import low inflation from overseas.
Shaikh Abdullah said, however, that the economy benefited from the dollar peg for most of the time and inflation remained modest despite fluctuations in recent years.
Qatar adopted a currency peg after gaining independence from Britain in 1971. It has kept the riyal pegged at QR3.64 to the dollar since 2001.
Qatar had been questioning merits of the peg in 2008, when it reeled under a record 15 per cent inflation, and in 2009.-Reuters