|
Dubai: Qatar is considering dropping its dollar peg in favour of a basket of currencies or revaluing its riyal among policy options to fight rising inflation, the local Gulf Times said, citing an economic adviser to the ruler.
"Pegging the riyal to only one currency has many disadvantages, especially if that country adopts monetary policies that clash with ours," said Ebrahim Al Ebrahim, chairman of Qatar's General Secretariat for Development Planning, according to the newspaper on Tuesday.
Constraints
As with other states in the world's biggest oil-exporting region, Qatar is constrained in its fight against inflation because the dollar peg forces it to track US monetary policy at a time when the Federal Reserve is cutting interest rates.
The state, the world's third-biggest holder of natural gas reserves, has slashed its deposit facility rate by 150 basis points in four moves since September 18, tracking the US Federal Reserve, which has reduced rates by 175 basis points.
Qatar has held its benchmark lending rate at 5.5 per cent since July 3, 2006.
The government is studying several measures to curb inflation, Al Ebrahim said. Inflation was 13.7 per cent in September, just below a record.
"These [measures] include depegging from the US dollar, revaluation of the riyal, increase in salaries and subsidising food items," Al Ebrahim said at a meeting organised by the Qatar Chamber of Commerce and Industry.
Both Qatar and the UAE are likely to drop their pegs to the dollar this year and track currency baskets, Deutsche Bank said last week. Deutsche expects the Qatari riyal to rise five per cent this year. Forward rates show investors betting the riyal will rise 1.2 per cent in a year.
Facing the region's highest inflation, Qatar is planning to sell bonds to soak up liquidity, as well as tighten restrictions on rent rises and other price controls.
Impact: Oman cuts repo rate
Oman's central bank, which pegs its riyal to the dollar, slashed its repurchase rate by 61 basis points and cut the yield on certificates of deposit in its first auction since an emergency US rate cut last week.
It set the 28-day cut-off rate at 1.14 per cent for an auction on Monday, compared with 1.41 per cent the previous week, central bank data showed. The one-month CD rate has fallen 90 basis points since the last auction in December.
- Reuters
|
