Qatar is set to issue its largest ever local currency bond in an effort to diversify its funding away from the US dollar, foster a domestic bond market and widen its range of monetary policy tools, the country’s finance minister said yesterday.
The central bank will announce the sale of Qatari riyal-denominated Islamic and conventional bonds to its domestic banks either today or tomorrow, Yousef Kamal, Qatar’s finance minister, told the Financial Times. Bankers familiar with the plans estimated the size of the bond sale at QR4bn ($1.1bn, €895m, £760m).
Central bank officials have for some time been calling for a domestic bond programme to mop up excess liquidity in the banking system caused by government cash injections intended to shore up the sector as the global crisis struck.
“Most of the local banks have a lot of excess cash, huge cash, and they are looking for a good client,” Mr Kamal acknowledged. “We have already allocated each bank its portion.”
Qatar is one of the world’s wealthiest countries, and a vast expansion of its liquefied natural gas industry has helped it shrug off the global recession. But bankers say the keenly-awaited riyal issue is part of the government’s plan to develop deeper capital markets in Doha.
Qatar issued a $7bn bond last November, the largest emerging market bond on record, and the country’s state-owned companies have been borrowing on international capital markets in recent years.
A domestic currency bond programme would also give the central bank options in terms of monetary policy to tame inflation, the main scourge in recent years.
“You need deep domestic capital markets so you can better absorb hot money inflows and lessen boom and bust cycles,” said Marios Maratheftis, head of research at Standard Chartered in Dubai. Qatar’s riyal bond sale “is positive, but we now need to see more regular issuance, different tenors and a more active secondary market.”
The central bank plans to list the notes on Qatar Exchange, the joint venture between NYSE Euronext and one of the emirate’s sovereign wealth funds, which aims to expand the depth and scope of the former Doha Securities Market.
Qatar had also started drawing up a government plan for more moderate economic growth after 2012, Mr Kamal said.