Qatar central bank to issue $1.9bln debt

Local currency sukuk and conventional bonds will to help banks meet liquidity requirements.

Qatar's central bank said on Sunday that it would issue 4 billion riyals ($1.1 billion) of local currency sukuk and 3 billion riyals of local currency conventional bonds, as part of an adjustment of monetary policy and in order to help commercial banks meet Basel III liquidity requirements.

The central bank did not give the time period for these issues; it said the timing would be announced later. Local currency debt will be issued every quarter, half with three-year maturities and half with five-year, it said in a statement.

"The aim of issuing these bonds is to develop monetary policy and the implementation of a mechanism of coordination between monetary and fiscal policy and support the strength of the banking system and financial and market tools," the central bank said.

Last Thursday, the state-run Qatar News Agency reported that the central bank would sell a combined 4 billion riyals of three- and five-year bonds and sukuk. There was no explanation of why the QNA report differed from the central bank statement.

In January, the International Monetary Fund's mission chief for Qatar told reporters that authorities planned debt issues to build a domestic sovereign yield curve, as part of the country's efforts to develop a local currency debt market.

The issues will help the world's top liquefied natural gas exporter manage excess liquidity in the banking sector that has been created by rapid economic growth; liquidity may be boosted further by the country's massive infrastructure building programme, which is due to accelerate this year.

Qatar has issued local currency bonds before. In January 2011, the central bank issued a 50 billion riyal, three-year bond directly to local banks as a step to drain excess money from the banking system.

In addition, the central bank launched monthly auctions of 91-, 182- and 273-day Treasury bills in May and August that year to soak up excess funds.

As a result, available liquidity dropped to a mere 5.8 billion riyals at the end of 2011 from 73.2 billion riyals a year before, the central bank has said.

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