Qatar Central bank stops loans to public sector
MENAFN - The Peninsula - 03/01/2010
(MENAFN - The Peninsula) Qatar Central Bank (QCB), the country's banking regulator, and its counterparts in Saudi Arabia, Bahrain and Kuwait have been asked to stop lending to the public sector with effect from January 1, 2010.
The move is part of the plans of the four Gulf Cooperation Council (GCC) states to set up a common monetary union sooner rather than later, with a view to floating a single currency.
The United Arab Emirates (UAE) and Oman have opted out of the common monetary union plan, but observers say they expect the two countries to join the union once the single currency is floated and becomes a success story like the euro.
The QCB and central banks from the three other GCC countries will, thus, be selling off their public sector loan portfolios.
According to details available, the draft GCC common monetary union agreement prohibits the central banks of member-states from lending to public companies. The move aims at freeing a future regional central bank from its role of subsidising the public sector of member-states in line with the European model.
The European model is that of an independent central bank which does not lend to state-owned or semi-government entities. Although a central bank usually does not lend to state-owned entities, it is the banker to the government of the country concerned and one of its major roles is to issue bonds on behalf of the government. The QCB, for instance, has issued several bonds on behalf of the government and some of them have matured. It is, however, not known if bonds are considered as part of the public sector loan portfolio of the QCB.
The Qatar Development Bank (QDB) last year disbursed housing loans worth a staggering QR3.26bn to more than 5,000 Qatari government employees. The finance was understandably provided by the QCB.
Now, the four GCC states, including Qatar, have begun in earnest to resolve some of the critical issues related to the launch of a common regional currency that have been lying unattended for a long time.
A major issue that faces the launch of the proposed currency is whether it would be pegged to the dollar like the Qatari riyal or to a basket of international currencies which is currently the case with the Kuwaiti dinar.
Expert opinion is largely in favor of pegging the proposed common Gulf currency to a basket of global currencies such as the dollar, euro, the Japanese yen and pound sterling.
These are currencies of the countries with which the four GCC states have large and active trade links. Managing exchange rates against a basket of currencies rather than a single currency would allow adequate flexibility to tailor monetary policies 'of the union of four' that can address domestic conditions and withstand external shocks, say experts.
By Mohammed Saeed
MENAFN - The Peninsula - 03/01/2010
(MENAFN - The Peninsula) Qatar Central Bank (QCB), the country's banking regulator, and its counterparts in Saudi Arabia, Bahrain and Kuwait have been asked to stop lending to the public sector with effect from January 1, 2010.
The move is part of the plans of the four Gulf Cooperation Council (GCC) states to set up a common monetary union sooner rather than later, with a view to floating a single currency.
The United Arab Emirates (UAE) and Oman have opted out of the common monetary union plan, but observers say they expect the two countries to join the union once the single currency is floated and becomes a success story like the euro.
The QCB and central banks from the three other GCC countries will, thus, be selling off their public sector loan portfolios.
According to details available, the draft GCC common monetary union agreement prohibits the central banks of member-states from lending to public companies. The move aims at freeing a future regional central bank from its role of subsidising the public sector of member-states in line with the European model.
The European model is that of an independent central bank which does not lend to state-owned or semi-government entities. Although a central bank usually does not lend to state-owned entities, it is the banker to the government of the country concerned and one of its major roles is to issue bonds on behalf of the government. The QCB, for instance, has issued several bonds on behalf of the government and some of them have matured. It is, however, not known if bonds are considered as part of the public sector loan portfolio of the QCB.
The Qatar Development Bank (QDB) last year disbursed housing loans worth a staggering QR3.26bn to more than 5,000 Qatari government employees. The finance was understandably provided by the QCB.
Now, the four GCC states, including Qatar, have begun in earnest to resolve some of the critical issues related to the launch of a common regional currency that have been lying unattended for a long time.
A major issue that faces the launch of the proposed currency is whether it would be pegged to the dollar like the Qatari riyal or to a basket of international currencies which is currently the case with the Kuwaiti dinar.
Expert opinion is largely in favor of pegging the proposed common Gulf currency to a basket of global currencies such as the dollar, euro, the Japanese yen and pound sterling.
These are currencies of the countries with which the four GCC states have large and active trade links. Managing exchange rates against a basket of currencies rather than a single currency would allow adequate flexibility to tailor monetary policies 'of the union of four' that can address domestic conditions and withstand external shocks, say experts.
By Mohammed Saeed