WATCH | Panic buying ensues in Qatar; nation’s currency under pressure as Saudi, UAE banks delay deals

June 6, 2017 - 8:35 PM
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An aerial view of Doha's diplomatic area March 21, 2013. REUTERS/Fadi Al-Assaad/File Photo

MANILA, Philippines – Panic buying ensued among citizens and expatriates, including Filipinos in Qatar as Gulf Arab countries led by Saudi Arabia decided to severe their ties with the tiny but wealthy nation by cutting land, air, and sea travel from the peninsula.

Conscious of the fact that over one-third of Qatar’s food supplies were being sourced from Saudia Arabia and the United Arab Emirates and that the countries might soon stop exporting, people in the oil-rich peninsula lined up in supermarkets and stocked up on bread, meat, drinks, and other essentials.

But Vera Ilagan, A Filipino working in Qatar, said she didn’t join the rush to buy basic necessities as she could still rely on local brands.

Also, she said she got information that India would be ready to export goods to Qatar and that a ship from Iran had just docketed in the peninsula carrying food supplies.

“Ang issue dito…is panic buying na possible mawawalan supplies. It’s a fact most goods nanggagaling sa Saudi and UAE kasi kami kahit sa bahay — ‘yong gatas namin, ‘yong tinapay namin, lahat ng frozen goods, lahat tatak Saudi. It just so happened na ‘yon ang gusto naming brand. Meron namang local brands din, supply ng Qatar. Ang mangyayari dito magsu-switch lang kami ng brand,” she said.

What Ilagan worries about is the possible increase of prices of products in Qatar. “More than the fear na mauubusan ng supply, mauuna ‘yong magtaas ng presyo ng bilihin.”

WATCH NEWS5’S VIDEO INTERVIEW WITH VERA ILAGAN:

Qatari riyal under pressure

Qatar’s currency came under pressure on Tuesday as Gulf Arab commercial banks started holding off on business with Qatari banks because of a diplomatic rift in the region.

Banking sources said some banks from Saudi Arabia, the United Arab Emirates and Bahrain delayed letters of credit and other deals with Qatari banks after their governments cut diplomatic ties and transport links with Doha on Monday, accusing Qatar of backing terrorism.

Qatar has dismissed the terrorism charge and welcomed a Kuwaiti mediation effort. Doha, the world’s biggest liquefied natural gas exporter, says it has enough reserves to support its banks and its riyal currency, which is pegged to the dollar.

With an estimated $335 billion of assets in its sovereign wealth fund and its gas exports earning billions of dollars every month, Qatar has enough financial power to protect its banks.

“We are watching the financial sector very closely. If the market needs liquidity, the central bank will definitely provide liquidity,” a Qatari central bank official told Reuters.

Nevertheless, losing some of their foreign business links could be uncomfortable for Qatari banks because they have been expanding their loans faster than other banks in the six-nation Gulf Cooperation Council. To fund this, they have been seeking loans and deposits from the rest of the GCC.

Qatari banks have been borrowing abroad to fund their activities. Their foreign liabilities ballooned to 451 billion riyals ($124 billion) in March from 310 billion riyals at the end of 2015, central bank data shows.

So any extended disruption to their ties with foreign banks could potentially threaten a funding crunch for some Qatari banks. Banks from the UAE, Europe and elsewhere have been lending to Qatari institutions.

Because of such worries, the Qatari riyal fell in the spot market on Tuesday to 3.6470 against the U.S. dollar, its lowest level since June 2016, although it later rebounded to 3.6405, almost equal to its official peg of 3.64.

It also fell slightly in the one-year forwards market, where traders bet on rates 12 months from now.