Picture: REUTERS
Picture: REUTERS

Doha — Qatari authorities stepped up their support of domestic banks for a third month in an attempt to offset foreign withdrawals, as the showdown between the Gulf emirate and a Saudi-led alliance shows no sign of abating.

Public-sector deposits grew 10.5% in August to 295-billion riyals ($80bn), central bank data show, bringing the increase to about 53-billion riyals since the crisis began more than three months ago. That helped total domestic deposits grow 5% to 645-billion riyals, even as nonresident deposits declined for a third month to 149-billion riyals. They stood at 171-billion riyals in June.

The Saudi-led boycott is weighing on the Qatari economy, with economists expecting gross domestic product to grow at the slowest pace since 1995.

The Qatar Investment Authority, the country’s sovereign wealth fund, pumped almost $40bn of its $340bn to support the economy and financial system in the first two months of the standoff, Moody’s Investors Service said on September 13. The fund sold a bloc of shares in luxury jewellery retailer Tiffany, weeks after reducing its stake in Credit Suisse Group.

"The Qatari government would probably continue to support the banking system until the banks get used to the new situation and find alternative sources of funding,’’ said Dima Jardaneh, head of Middle East and North Africa research at Standard Chartered in Dubai. But seeking funds outside the region may not be easy as investors have to factor in the political risk, she said, adding that balance sheets may shrink somewhat.

"One avenue that banks have tapped is private placement," she said. "The government is essentially helping banks get through the adjustment period."

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed their diplomatic and transport links with Qatar on June 5, accusing the world’s largest exporter of liquefied natural gas of supporting terrorist groups, cozying up to Iran and meddling in their internal affairs. Qatar denies the charges.

Bloomberg

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