Strategy for 2022

What will be your priorities for your new five-year term?

The global economic and financial front has raised new challenges and opportunities that have influenced central banks all over the world. In fact, they have changed the future of central banks. Two priorities lead our five-year agenda: strengthening monetary policy framework as well as financial stability and fostering the advancement of the financial and banking infrastructure. Henceforth, aiming to achieve Qatar’s ambition to be a leading financial hub in the region, three main strategies have been designed considering new policies, regulations, and tools. Strategy wise, from the sectorial level, the Financial Sector Regulatory Strategy for 2017-2022 was released after the economic blockade in June 2017. The strategy focuses on guiding Qatar in its future endeavors toward building a sound and resilient financial sector to ensure sustainable economic growth in alignment with Qatar National Vision 2030 objectives. The strategy also takes into consideration the requirements from the banking and financial sector to support the country in preparing to host the 2022 World Cup and contribute to the successful execution of the event, for example furtherance of the payment system platform. Considering the globalization of financial technology and innovation and the rapid digital elevation, which implies certain challenges making the process of financial intermediation more complex, and higher risks of cyberattack, we have designed a strategy in cooperation with Qatar Development Bank (QDB) to create a fintech hub in the country, which is critical for future success. Awareness that the ecosystem will be more important than ever leads to the necessity of creating a financial inclusion and literacy strategy, which will seek to broad-base the financial sector through both supply and demand-side measures linking banks’ service development to customs awareness and protection. A key element of this strategy is to promote the SME sector, which will also be consistent with the Qatar National Development Strategy (QNDS 2) objective of economic diversification and promoting greater private participation. In addition, we have been continuously strengthening our regulatory and supervisory systems to ensure that the financial system remains safe, stable, and solid and is resilient enough to address unforeseen challenges. We are committed to implementing latest global standards such as Basel 4, issued from time-to-time by global standard setting bodies. We also focus on developing more young, bright Qataris and professionals to contribute to the success of the financial sector through our Human Capital Development goal.

In terms of promotion of the green economy, what are some of the plans of the Qatar Central Bank?

The focus on green financing has spread rapidly throughout the world. Leading central banks are taking significant initiatives to address issues related to such financing. In Qatar, we have also taken initiatives to support green financing initiatives. Commercial banks have launched innovative credit products like ‘green mortgage,’ which rewards environmentally conscious new home loan-takers with concessional financing terms. Relatedly, Qatar Development Bank (QDB) is also proactive in funding SMEs in agriculture, livestock, and fisheries with the twin objectives of empowering local businesses and achieving self-sufficiency. The Second Strategic Plan for Financial Sector Regulation provides a well-defined roadmap to promote sustainable investment and green finance. This includes, among others, devising incentives for firms to promote green financing, enhancing cooperation with QDB to foster economic diversification, and exploring the possibility of issuing green bonds.

With the implementation of International Financial Reporting Standards (IFRS 9), what improvements do you see in the Qatari financial sector?

IFRS 9 is designed to bring more transparency, accountability, and efficiency to financial institutions across the world through high-quality accounting criteria. Given the forward-looking nature of this regulation, this will make banks proactive in establishing and building up their allowance for possible future credit losses. Not only will this further improve their credit risk assessment skills, it will also improve data quality and ensure better pricing of loans. This will enable them to better manage their profitability, as identification and corrective measures can be taken well in advance. IFRS 9 reporting will enhance the overall health and resilience of the banking sector and better equip them to address sharp and sudden downturns in economic cycles.

How would you assess the stability of the public financial accounts in Qatar?

The downturn in energy prices had led to budget deficits in the last few years. However, with better expenditure management and cost rationalization, we were able to successfully tide over the difficult period. In the last few years, we have initiated fiscal reform measures that seek to promote growth-friendly expenditures to help support the macro-financial outlook. Thankfully, the upturn in energy prices coupled with the low fiscal breakeven oil prices provides us the headroom to close the fiscal gap, while pursuing gradual fiscal consolidation.

How well is Qatar financially protected against the enduring regional situation?

We have been living with the economic blockade for well over a year and have returned to ‘business as usual.’ Most of the volatile non-resident deposits have moved out of the system, and as a result, banks now have more stable deposit base. Besides, their capitalization levels are significantly above the regulatory minimum levels and the levels of non-performing loans are fairly low. Besides, these non-performing loans are adequately provisioned for. We regularly undertake stress tests of various risks to ascertain banking system resilience. In addition, we also undertake regular onsite inspection of banks coupled with off-site surveillance. The balance of evidence points to strong resilience of the banking sector.

How do you expect the private finance and banking sector to develop in the coming years?

Moving forward, I see space for the banking sector to grow and prosper. The significant financing opportunities in the run-up to the 2022 FIFA World Cup provides them with adequate room to expand their loan books. Having learnt important lessons from the economic blockade, they have also been improving their funding structure with focus on more stable and long-term sources. Banks also offer shareholders and clients a wide range of products and services to grow, manage, and protect their wealth and assets. The firming up of oil prices over the last few years has significantly boosted banking sector liquidity and keep lending rates at competitive levels. On our part, we are continuously evaluating and suitably implementing regulatory standards to ensure that the system remains safe, sound, and solid.

What is your outlook for the year ahead?

Given the outlook for oil prices this year and next, we expect to see significant improvements in both the domestic and external balances. In 2017, our fiscal deficit turned out to be lower than initially projected, and the current account registered a healthy surplus. The various high-frequency financial indicators also point to a return to normalcy. The initiatives taken by the authorities in various sectors after the blockade were aimed at ensuring self-sufficiency, and we are gradually witnessing the benefits of these initiatives in our daily lives. Having successfully demonstrated their resilience to the economic blockade, the banking sector has regained the confidence of international investors. The return of confidence will further boost the economic and financial sectors and provide the required momentum for the sector to grow and prosper.