The Qatar Central Bank is the central bank of Qatar.

History

Prior to 1966, currencies in circulation in Qatar were those linked to the Pound Sterling, like the Indian Rupee and Gulf Rupee. When India devalued the Rupee (including the Gulf Rupee) by approximately 35%, Qatar and Dubai decided to replace the Gulf Rupee with the Saudi Riyal as an interim measure until the issuance of a new currency.

On the 21st of March 1966, Qatar and Dubai signed a currency agreement to set up the Qatar-Dubai Currency Board. The new board issued the first national currency, known as the Qatar-Dubai Riyal (QDR) on September 18, 1966 at a gold par value of 0.186621 grams of pure gold—the same as the pre-devaluation rate of the Gulf Rupee. The Pound Sterling continued to provide cover for the new currency.

On December the 2nd 1971, Dubai became a part of the UAE. Therefore, it was decided to relinquish the Qatar Dubai Currency Board in accordance with Amiri Decree No. 6 of May 1973. On May 13th 1973, Law No. 7 of 1973 was issued, establishing the Qatar Monetary Agency (QMA) to assume the duties of a central bank. Further Amiri Decree—No. 24 of 1973—was issued authorizing the redemption of QDR and the issuance of a new currency known as the Qatari Riyal (QR), with the same par value against gold as the QDR.

QMA was responsible for maintaining the stability of the QR exchange rate against, and its free convertibility into, other currencies. In 1975, as per Decree No. 60 of 1975, the QR was pegged to the Special Drawing Rights (SDR) at a rate of 0.21 SDR per QR with a fluctuation margin of ± 2.25% (QR 4.7619 ± 0. 2.25% per an SDR unit). Over the period 1973-1993, QMA adopted the United States dollar (USD) as an intervention currency to fix the daily value of the QR. The QR exchange rate against the USD was to be determined on basis of the latter’s exchange rate against SDR as determined by the IMF. The QR exchange rate against other currencies was to be determined on basis of USD exchange rate against other currencies in the international financial markets. The tolerable flux margin of the QR against the SDR was increased to ± 7.25% in early 1976 due to appreciation of the USD against the SDR in late 1975. Hence, the QR exchange rate used to fluctuate against currencies other than the USD, in line with the fluctuations of the latter against those currencies.

During the second half of the seventies, QMA revalued the QR against the USD many times in order to stabilize its value against other major currencies of Qatar’s trading partners and to alleviate pressures of imported inflation. Over the period March 1976 to June 1980, the QR was revalued twelve times against the USD. On the whole, the QR was revalued against the USD by 8.5%, compensating for 13.4% depreciation in the value of the latter against the SDR. When the USD started its upward trend (in July 1980) vis-à-vis other major currencies, QMA had maintained a de facto exchange rate of QR 3.64 per a USD unaltered. The immediate impact of this link was the appreciation of the QR with the appreciation of the USD against major currencies of Qatar’s trading partners, particularly the European countries.

Established in August 1993, the Qatar Central Bank (QCB) has inherited the QMA monetary strategy of targeting the exchange rate. QCB kept adopting the policy of fixed exchange rate against the USD at the same rate of QR 3.64 per USD. In their December 2001 Summit, GCC leaders decided to adopt the USD as a common peg for the GCC national currencies as a step towards accomplishing the GCC monetary union with a united currency.

Objectives

1. Stability of Riyal exchange rate and its capability of being exchanged for other currencies;
2. Stability of commodities and services prices;
3. Financial and banking stability;
4. Other macroeconomic and development objectives consistent with the State policy and the objectives mentioned above.

In its quest to achieve the foregoing, Qatar Central Bank maintains a balance between local and external considerations in order to avoid imbalances and instability, through:

• Layout and enforce the State monetary policy, policy of the exchange rate and financial and banking supervision;
• Take appropriate measures to counter global, regional and local, economic and financial disturbances and strive to detect the dangers that threaten the financial system as a whole, and reduce the repercussions of the same;
• Strengthen the infrastructure of assisting central banking services systems i.e., payment systems, clearance, credit bureaus and others, including the QCB’s role as lender of last resort;
• Regulate, monitor, supervise and develop the banking business, and enhance its efficiency, so as to achieve monetary and financial stability;
• Notify the Council of Ministers of any factors, which may endanger the financial or banking stability and propose the relevant policies.

Exchange Rate Policy

QCB has adopted the exchange rate policy of its predecessor, Qatar Monetary Agency, through fixing the value of the Qatari Riyal (QR) against the US dollar (USD) at a rate of QR 3.64 per USD as a nominal anchor for its monetary policy. The peg has always been highly credible. The targeted peg was officially authorized by Amiri Decree No. 34 of 2001 issued in July, substituting the de jure exchange rate policy of pegging to the SDR that was in effect since 1975.

To date, QCB has continued implementing its exchange rate policy of hard pegging to the USD at an average price of QR 3.64 per USD. Commercial banks domestically trade the USD on basis of price determined by QCB. Nonetheless, commercial banks add a small margin of 0.24% to the QCB fixed price when dealing with the public. Otherwise, commercial banks trade other currencies based on QCB determined exchange rate of QR against the USD and market determined exchange rate of a given currency against the USD. Table 1, provides a historical summary of the exchange rate regime implemented in Qatar. For further discussion, see Exchange Rate Policy in Qatar under Publications.

Financial Stability

Qatar National Development Strategy 2011-2016 indicates that development mainly relies on four pillars, one of them being the sustainable economic prosperity. In this regard, one of the challenges stated in Qatar National Strategy 2030 resides in "selecting and managing the path, which helps to achieve prosperity and to avoid economic imbalances and unrests".

Providing economic stability is a prerequisite to urge investors to make long-term commitments to expand the productive base. Although any economy is inevitably exposed to crises, chronic or long-term fluctuations, including extreme financial distress situations, may adversely affect the economic activity.

The State of Qatar may be one of the few countries where the fluctuation waves did not result in undesirable consequences, as it was the case in some economies, which essentially rely on natural resources exports. Through its national vision and development strategy, the Government is fully aware that, if development is slowed down in the hydrocarbon resources sector, the sound macroeconomic policy supporting a stable environment will play a crucial role in the expansion and prosperity of the non-hydrocarbon sectors. In this regard, and in line with the State’s policy, vision and strategy, Qatar Central Bank seeks to promote and maintain financial stability in Qatar through the adoption of a two-pronged policy:

1. The first axis is geared towards preventing the system from being exposed to unacceptable risk levels. Preventive measures emphasize regulation and supervision of banks and other financial institutions on a regular basis, so as to facilitate early detection of weaknesses in the financial system.
   
   In spite of supervision and vigilance of highest order, it is impossible to completely cushion the financial system against all types of risks.
2. Therefore, the second axis is remedial in nature as it seeks to contain the crisis at the earliest possible and prevent contagion.

On the other hand, QCB constantly ensures financial stability by setting the appropriate financial environment, and constructs and monitors solvency and financial soundness indicators on a regular basis.

Useful links

Currency of Qatar:

Qatar riyal

List of Central Banks:

Central Banks

Official website of Qatar Central Bank:

www.qcb.gov.qa

Ministry of Economy and Finance:

www.mof.gov.qa