Qatari banks’ reliance on non-resident deposits has progressively fallen by more than one-third (nearly $30bn) since their peak registered in late-2021, the International Monetary Fund said in its country report released on Thursday.
The completion of World Cup-related projects and hydrocarbon windfalls have reduced credit demand from the public sector and provided additional liquidity to banks, reducing their funding needs. The Qatar Central Bank has implemented several macro-prudential measures since (spring of) 2022 to discourage banks from relying on non-resident deposits, especially of short tenors.
The report was issued after a visit to Qatar by a team led by IMF’s Ran Bi in early May.
As domestic monetary policy has tightened, consistent with the currency peg to the US dollar, banks’ asset quality, liquidity and profitability remained solid, and their reliance on nonresident deposits has fallen.
“QCB has maintained price and financial stability. Monetary policy has been tightened broadly following the US Federal Reserve, consistent with the currency peg to the dollar. Monetary policy transmission has strengthened through more effective liquidity management.
“Banks remain well-capitalised, liquid and profitable, although the non-performing loans (NPLs) ratio has edged up amid monetary policy tightening. Relatively high provisioning for NPLs, on the other hand, mitigates the risk,” IMF said.
Qatar’s AML/CFT mutual evaluation, completed in February, confirmed that the nation has made significant progress on technical compliance with the FATF Standards, while more work is needed to further improve the effectiveness.
The ambitious structural reform agenda underpins Qatar’s economic diversification efforts to build a more inclusive, knowledge-based and greener economy.
“Structural reforms have advanced further to achieve Qatar National Vision 2030, including in green financing and digitalisation. The Ministry of Finance has developed a Sovereign Green Financing Framework with a clear set of principles," the report said.
The QCB has created a dedicated department to define the ESG policies, standard reporting framework and management of ESG risk and compliance. Related initiatives at the national level involving main regulatory bodies are being assessed. Qatar has also successfully capitalised on the 2022 FIFA World Cup to upgrade its digital infrastructure.
The Investment Promotion Agency of Qatar embarked on partnerships to accelerate digital transformation and foster technological innovation domestically, including through FDI. The QCB recently launched the National Fintech Strategy, with detailed guidelines and standards under development, IMF noted.