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By Satish Kanady / The Peninsula
DOHA: Qatar banks’ combined credit, both inside and outside the country, increased by QR98.5bn or 15.1 percent in 2015, as compared with the QR74.8bn increase (13.0 percent) in the previous year. Credit to private sector increased significantly reflecting robust non-hydrocarbon sector growth as well as government’s push for greater involvement of the private sector as part of the economic diversification strategy, the Qatar Central Bank (QCB) has revealed.
The robust growth in private sector credit during 2015 was driven mainly by higher growth in credit to real estate and industrial sectors. The higher credit growth to these sectors was in line with robust growth in their economic activities. At the same time, continued strong growth, albeit with some moderation, in credit to general trade, contractors and consumption also provided support.
In 2015, there was also a significant change in the currency composition of total credit as compared to the previous year. Local currency credit decelerated considerably, while foreign currency credit increased sharply due to increase in foreign currency credit both inside and outside Qatar. Lending inside Qatar in foreign currency increased to QR141.0bn in December 2015 from QR101.3bn in December 2014. The increase in foreign currency credit outside Qatar, however, was in line with the sharp increase in foreign currency deposits for non-resident.
On the liquidity management , the central bank noted that short-term liquidity through treasury bills (T-bills) continued, with lower auction amounts in the fourth quarter leading to injection of liquidity to the system. The auctions of treasury bonds (including sukuks) introduced since March 2013, to manage structural liquidity, continued intermittently during 2015 in line with the evolving liquidity situation, while some earlier issued government bonds matured during the year. At the same time, maturity profile of T-bonds was lengthened to 10-years to aid in the development of a proper yield curve.
According to the central bank, a total of QR22bn was issued during 2015, of which QR14 was conventional bonds and the remaining were Sukuks. All of these issuances were during the second half of the year, as T-bonds auctions were interrupted during the first half due to a host of factors, as discussed earlier. The objective was to facilitate the liquidity management framework of the QCB and help develop the domestic debt market, in line with the National Development Strategy, 2011-16.
QCB noted that domestic liquidity conditions were influenced by three distinct factors in 2015; namely foreign exchange flows, net government spending; and deposit and credit growth, all of which were impacted by the plunge in global oil prices. Foreign exchange inflows moderated reflecting a fall in export earnings driven by decline in global oil prices. This adversely impacted government revenues and led to streamlining of government spending plans with a focus on improving efficiency. Nonetheless, the government continued with its infrastructure investment programs in line with the economic diversification strategy. Low oil prices also induced a fall in public sector deposits and along with it public sector credit growth was moderate. However, private sector credit continued to grow strongly, partly due to increased focus by the government on economic diversification and private sector participation.
© The Peninsula 2016
