Qatar winds down pumping money into local banks after rate of outflow slows

Ever since the start of the illegal blockade of Qatar, the country has been pumping in money to the local banking system in order to shield them from the sanction by Arab countries. 

But now, thanks to slowing withdrawals of deposits from Qatari banks, the country’s government has stopped pumping money into the system, according to central bank data, reported Reuters.

Banks and investors from Saudi Arabia, the UAE, Bahrain and Egypt had begun pulling deposits and other funds out of Qatar in June, when those four states cut diplomatic and trade ties with Doha.
The deposit outflow initially put the balance sheets of some Qatari banks under pressure, and the government responded by injecting billions of dollars of its own money into accounts at the banks. Much of the money came from the country's sovereign wealth fund — the Qatar Investment Authority (QIA), reported Gulf Times.

However, the outflows are now slowing, as the four states run out of money left to withdraw. That is reducing the need for the government to aid the banks.

In October, foreign customers’ deposits at banks in Qatar — the vast majority in the form of foreign-currency deposits — fell by only QR5.1bn ($1.4bn) from the previous month, to QR137.7bn, data showed.

The decline was slower than falls of QR6.2bn in September, QR8.2bn in August, QR13.4bn in July and QR14bn in June.

The Qatari public sector’s deposits with local banks fell slightly in October after soaring during the initial months of the sanctions, indicating the government was no longer pumping fresh money into the system as a whole.

Qatar Central Bank Governor HE Sheikh Abdullah bin Saud Al Thani said last month that the government and the central bank had more than enough financial resources to protect the banking system from outflows.

After the sanctions were imposed, Qatari banks' borrowing from foreign banks also fell sharply as institutions from the four Arab countries stopped extending loans.
October’s data suggested, however, that Qatari banks have begun to have success filling this gap by increasing their borrowing from Asia and Europe. 

Meanwhile, Qatar Central Bank (QCB) has dispelled apprehensions of investors in the Qatar Stock Exchange (QSE) over MSCI’s proposed move as it will guarantee an exchange rate equivalent to the Qatari official onshore rates.