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Qatar’s dollar peg to remain despite US debt concerns

Qatar Central Bank Central Bank governor Sheikh Bandar bin Mohammed bin Saoud al-Thani Reuters
Central Bank governor Sheikh Bandar bin Mohammed bin Saoud al-Thani said Qatar would make decisions 'appropriate for our economy'
  • Qatar Central Bank chief says riyal will retain dollar peg
  • Country did not mirror the last US interest rate
  • US deadline to agree national debt ceiling is approaching

The governor of Qatar’s Central Bank has reaffirmed his country’s commitment to the dollar peg, despite the US being just days away from a potential debt default.

The Qatari riyal has been linked to the US dollar since mid-2001.

“It’s been very effective and efficient for our economy,” Sheikh Bandar bin Mohammed bin Saoud Al-Thani said. “Our main export is energy and the main revenue is in dollars, so it’s a very appropriate policy to keep our currency peg to the US dollar.”

All eyes will be on US Federal Reserve chair Jerome Powell next month and whether the Fed could be in line to raise interest rates for an 11th consecutive time.

Any decision would typically be mirrored by Gulf central banks, although Qatar left its rates unchanged in February, despite a Fed hike.

“Our decisions that we take is what is appropriate for our economy,” Al-Thani said this week at Bloomberg’s Qatar Economic Forum (QEF) in Doha.

Saudi Arabia and the UAE have previously been credited with exploring alternatives to the dollar for non-oil global trade.

On Sunday Iraq’s Interior Ministry called a ban on using the US dollar in personal and commercial transactions.

In March China National Offshore Oil Corporation and France’s Total Energies completed the first trade of Emirati liquefied natural gas in Chinese yuan.

India has also said it would like to trade with Mena countries in rupees.

But Nouriel Roubini, a professor emeritus at New York University’s Stern School of Business, told QEF delegates that the Qatar dollar peg “has been a source of stability for the regions and is going to remain”.

Nonetheless, he cautioned the US must not take this situation for granted. “I think the US has to seriously think about how you maintain the system that is dollar-based but one that is safer and more stable than the current one,” Roubini said. “The changes will have to occur over time.”

The US faces a potential default on its debt as Democrats and Republicans struggle to reach an agreement on whether to raise a $31.4 trillion cap on government borrowing.

Ratings agency Fitch this week put the country’s credit on watch for a possible downgrade, ahead of the June 1 deadline.

However, managing director of the International Monetary Fund Kristalina Georgieva told the QEF she was confident that the matter will be resolved “come the 11th hour”.