Money, Banking, Budget and Trade

Persian Gulf States Table of Contents

Money and Banking

The Indian rupee was the principal currency until 1959, when the government replaced it with a special gulf rupee in an effort to halt gold smuggling into India. In 1966 Qatar and Dubayy jointly established a currency board to issue a Qatar-Dubayy riyal. In 1973 Qatar introduced its own riyal, which was pegged to the International Monetary Fund's special drawing rights. The exchange rate is tied to the United States dollar at a rate of QR3.64 per US$1.00.

The Qatar Monetary Agency (QMA), established in 1973, has most of the traditional powers and prerogatives of a central bank. The QMA regulates banking, credit, and finances; issues currency; and manages the foreign reserves necessary to support the Qatari riyal. Unlike many central banks, the agency shares control over the country's reserves with what was in 1973 the Ministry of Finance and Petroleum. QMA does not act as the state's banker, which is the preserve of the Qatar National Bank (QNB).

QMA's long-time governor, Majid Muhammad al Majid as Saad, was replaced in January 1990 by Abd Allah Khalid al Attiyah, who had been general manager of QNB. The position of governor was upgraded to ministerial level, signaling a more assertive future role for QMA in the country's banking sector.

Banks give loans at rates between 7 and 9 percent, and they pay 7 percent on deposits. About fifteen local and foreign banks operate in Qatar. Two banks--Qatar Islamic Bank, licensed in 1989, and Qatar International Islamic Bank, licensed in 1990-- reflect a trend toward Islamic banking that started in Saudi Arabia.

Banking in the gulf has been vulnerable to the shaky regional security situation. As a result of the Iraqi invasion of Kuwait, banks in Qatar lost an estimated 15 to 30 percent of deposits in late 1990.


Oil and gas revenues make up 90 percent of government revenue, and government spending is the primary means of injecting these earnings into the economy. Given the small size of the local market, government spending generates most of the economic activity. Because of increased involvement in the international economic scene, in April 1989 Qatar's fiscal year was changed from the Islamic to the Gregorian calendar.

Large budget surpluses in the 1970s funded major development projects, with government spending leveling off and dropping in the 1980s, years of more modest oil revenues. After years of surpluses, the government had a deficit of nearly QR8 billion in 1983. The government has attempted to keep deficits down by reducing the number of new projects and delaying those under way. In addition, the fiscal situation of the regime can often be gauged by the amount of time required to pay contractors.

Budgets offer only a rough estimate of actual government spending. Many significant items, such as military and amirate expenses, do not appear. Projections are consistently conservative, and deficits often are lower than predicted. In the 1986-87 period, when oil prices plummeted, the government did not even announce a budget. Restrained spending in recent years has meant frustration for contractors relying on government contracts, but the policy has also led to ever-shrinking deficits. The budget continued to show a deficit in the early 1990s.

Overseas assets are estimated at between US$10 and US$14 billion. These assets have been periodically tapped to make up for shortfalls in oil revenues.


The main export and source of revenue is oil, although the government's efforts to diversify Qatar's industrial base have resulted in the growth of other exports. Crude oil, petroleum products, and LNG accounted for 82 percent of exports in 1989, chemicals (ammonia and urea) accounted for 12.4 percent, and manufactures (mainly steel) accounted for 5.1 percent. Total earnings for the year were QR9.7 billion. Japan was the largest customer at 54.4 percent of purchases, followed by Thailand (5.0 percent) and Singapore (4.0 percent).

Because imports are financed by oil revenues, the level of goods coming into the country rises and falls with the oil economy. Between 1969 and 1979, for example, the value of imports grew an average of 40 percent annually. Imports declined in the early to mid-1980s, sinking to a low of QR4.0 billion in 1986, then rising gradually until they reached QR4.8 billion in 1989.

Machinery and transportation equipment accounted for 37.0 percent of imports in 1989, manufactured goods for 23.9 percent, food and live animals for 15.1 percent, and chemicals and chemical products for 6.0 percent. The main import sources were Japan (18.8 percent), Britain (11.6 percent), the United States (8.8 percent), Italy (7.8 percent), and the Federal Republic of Germany (West Germany) (7.3 percent).

In keeping with a Gulf Cooperation Council (GCC) agreement, Qatar raised tariffs from 2.5 to 4.0 percent in 1984. In addition, there is a 20 percent duty on steel products similar to those produced by Qasco. Qatar plays a small role in the regional entrepôt trade. Most imports arrive by sea and are for local use, with only a small percentage reexported to Saudi Arabia and the UAE.

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Source: U.S. Library of Congress