Qatar likely to resist currency pressure

CAIRO – 12 June 2017: Qatar is unlikely to devaluate its riyal on strong foreign reserves and balance sheets, London-based consultancy Capital Economics predicted Sunday.

After a rift in diplomatic ties between Qatar and Saudi Arabia, the United Arab Emirates (UAE), Egypt and Bahrain on June 5, speculations started to emerge that Qatari authorities might consider devaluating the currency after it suddenly weakened.

“The country’s strong balance sheet means the authorities are well-placed to withstand a prolonged period of capital flight,” Middle East economist Jason Tuvey said in the report.

Tuvey said Qatar is expected to resist devaluation as the impact of the rift will be limited due to the “relatively small” trade ties between Qatar and the other countries.

There are expectations that Qatari food imports will be affected by the rift, but the consultancy stressed Qatar’s ability to access imports from elsewhere.

Tuvey doubted the pressure from the other Gulf countries on Qatar would increase to an extent that would force Doha to devaluate the currency. “After all, if Qatar is forced to devalue, fresh concerns may be raised about other dollar pegs in the region,” he said.