Authorities in Qatar will use fiscal policy and money market operations if needed to prevent low oil and gas prices from causing a liquidity crunch in the banking system, the governor of the central bank (QCB) was quoted as saying.
Money market rates have risen sharply as flows of new oil and gas revenue into the system have decreased over the past year, and as the Qatari government has borrowed to fund an emerging budget deficit.
The three-month Qatar interbank offered rate is at 1.37 percent, up from around 1.07 percent a year ago.
In an interview published by international research firm The Business Year, Sheikh Abdullah bin Saud al-Thani said the central bank was still pursuing an "easy monetary policy stance" and that he did not think liquidity had become tight.
"Although the drop in oil prices has induced a fall in export earnings and government revenues and consequently government deposits, banking systemic liquidity has been comfortable so far, partly reflecting QCB's active liquidity management operations," he said.
Sheikh Abdullah also told The Business Year that he expected oil prices to recover in the coming year. But he added that if they did not, the central bank was prepared to intervene to keep market interest rates stable.
"On the monetary policy front, QCB will continue to actively manage liquidity in the system in order to ensure a stable interest rate environment and thereby facilitate adequate flow of credit to the productive sectors of the economy," he said.
"If low oil prices persist for long, policy space available in terms of both fiscal buffers and QCB's liquidity management operations could be used flexibly."
The world's biggest exporter of liquefied natural gas, Qatar is one of the Gulf's richest countries and is believed to have hundreds of billions of dollars worth of overseas assets, but the value of its energy exports almost halved last year.
Market sources told Reuters last week that Qatari commercial banks were discussing with the central bank the possibility of lowering its repo lending rate, now at 4.5 percent, to reduce pressure on their funding. Sheikh Abdullah did not comment on this in the interview.
Sheikh Abdullah welcomed the expansion of Qatar-based banks abroad as a sign of growing strength and confidence among the banks, but said the central bank was ensuring that the expansion was prudent by limiting foreign currency liabilities.
"The ratio of foreign currency asset to foreign currency liability of each bank should be at a minimum of 100 percent. This means that short positions are not allowed, but long are allowed."