Ok, so although Qatar has repeatedly claimed that it’s prepared to fight the “good” fight when it comes to resisting the demands of the Saudi-led alliance that set out to ostracize and economically isolate the filthy rich sheikdom last month, data out today from the central bank seems to suggest there’s a problem.
Namely, that Qatar’s international reserves plunged by a harrowing 30% in June to 88.85 billion riyals vs 126.73 billion riyals in May.
You should note that this came as foreign deposits at Qatar’s banks dropped the most in nearly two years as customers yanked their cash following the Saudi-orchestrated economic blockade.
The stress is of course readily apparent in interbank rates. Here’s QIBOR:
As a reminder, it was just last week when Reuters asked: “Qatar’s $300 billion conundrum: how liquid are its reserves?” Here are some excerpts:
When is $300 billion not enough? That question is key to Qatar’s future as some bankers and hedge funds speculate the super-rich state’s vast financial reserves may not be liquid enough to defend its currency in the long term.
Nobody doubts Qatar has a lot of money to resist economic sanctions imposed on it early last month, when Saudi Arabia and three other Arab states cut diplomatic and transport ties.
Central bank governor Sheikh Abdullah bin Saud al-Thani said last week that Doha could employ about $340 billion of reserves: some $40 billion plus gold at the central bank, and $300 billion at the Qatar Investment Authority, the sovereign wealth fund.
That suggests Qatar could cope comfortably with any capital flight due to the crisis. Bank of America has predicted $35 billion of outflows from the banking system within a year if other Gulf Arab states pull out deposits and loans.
So you can draw your own conclusions with regard to what this means for the peg, but ultimately, this just underscores the idea that “fair” or not, Doha might not be able to hold out indefinitely.
On Sunday, Bahrain Foreign Minister Sheikh Khalid Bin Ahmed Al Khalifa said the four Arab nations that isolated Doha are ready to talk with Qatar if it promises to meet their demands to fight terrorism.