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Qatar’s running up the bills for nothing

It seems bent on following a part of self destruction and capital erosion

Gulf News

Stock exchanges represent a mirror of the economy, in that it accurately reflects the state of businesses and the environment they operate in. In the case of Gulf markets, the time is not in favour of Qatar.

Cosmetics may hide many facial imperfections but cannot remove them. Similarly, dollars generated from gas may hide a lot of the economic difficulties in Qatar but cannot resolve them. Some may say that we are exaggerating the complexity of economic conditions. However, for a vice-president at the Qatari stock exchange firm Dlala Holding to urge investors to “feel with Qatar” reaffirms the reality of the deteriorating economic situation.

By way of confirmation, let us examine what’s been said by neutral institutions. Moody’s recently issued a report showing that within the first two months of the crisis, Qatar spent $38.5 billion (23 per cent of its gross domestic product) to support its economy.

This means that the amounts would have surged due to the continuing crisis, now in its fourth month. Moody’s added that Qatar is facing economic, financial and social costs that resulted from travel and trade restrictions. The future of Qatar’s credit, the agency said, will basically depend on the outcome of the conflict.

Given Qatar’s liquidity is being eroded due to the withdrawal of huge funds, especially the Gulf ones, the Central Bank of Qatar had no option but to sell 1 billion Qatari riyals’ worth of treasury bills and 650 million riyals’ worth of three-month notes.

Moreover, Bloomberg noted that Qatar’s sovereign fund sold a block of shares in the US jeweller Tiffany & Co. valued at as much as $417 million via Morgan Stanley. Qatar’s inflation also increased, to 4.2 per cent, which is a high rate for the Gulf.

The rise in import costs has raised the price of goods and services and led to imports of low quality products. The Qatari authorities got rid of 10,000 tonnes of foodstuff imported from Iran after discovering that they contain internationally banned chemicals, which puts the health of its citizens at serious risk.

These are just examples from dozens of international reports issued by various neutral institutions, demonstrating the increasing economic difficulties Qatar will have to face in order to maintain its relations with terrorist organisations such as Muslim Brotherhood, Hezbollah, Al Houthis and Governance of the Jurist in Iran, in turn sacrificing the interests of its people.

Capital depletion and flight will grow, putting more pressures on the currency and creating panic among foreign workers, as the value of their transfers on which they depend hit rock bottom. They are the most affected by the high inflation given their low salary rates, compared to the Qataris who have the financial ability to temporarily deal with rising prices.

If FIFA decides to withdraw the 2022 World Cup from Qatar because of the delayed construction projects — slowed down by the lack of materials coming from the UAE and Saudi Arabia — and exercise international pressure, it would be a fatal blow to the economy. German Chancellor Merkel has reportedly spoken about a withdrawal of the World Cup. Any of which could lead to the withdrawal of major companies associated with the projects and cost the treasury anywhere up to $200 billion.

So on what basis is Qatar being arrogant and what is it betting on?

The only way out of this ordeal is clear. Stopping funding of terrorism and interference in the affairs of others, especially its brothers in the Gulf countries, stopping coordination with the Iranian regime and playing its role in supporting stability, security and development. These are not difficult demands but serve the interests of Qatar and its neighbours.

Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.