Qatar has seen a cumulative 5% or 500 basis points (bps) hike in interest rates since January 2022, even as the central bank outlined four major priority sectors that would not bear the brunt of rate hike on their outstanding loans.
The Qatar Central Bank (QCB) on Wednesday increased the repo rate, deposit and lending rates by 25 basis points, the US Fed raised the reference rates (by 25 basis points) to their highest level in more than two decades, raising hopes that the latest hike could be the last for a long time.
The repo rate in Qatar has increased by a cumulative 5% or 500 bps from the beginning of 2022. Since January 2022, QCB repo rate has risen from 1% to 1.25% in March, then to 1.75% in May, 2.5% in June, 3.25% in July, 4% in September, 4.75% in November, 5.25% in December, 5.5% in March, 5.75% in May 2023 and the 6% in July. In 2022, the average repo rate was 2.77% and it was 1% in 2021.
The increasing repo rate comes in view of the fixed exchange parity with the greenback; otherwise higher-yielding dollar-based investments could put downward pressure on the local currency, market sources said, adding it may lead funds flow to bank deposits with higher returns and lower risk.
The QCB lending rate has cumulatively increased by 3.75% or 375 bps from the beginning of 2022. It was seen jumping from 2.5% in January to 2.75% in May, 3.25% in June, 3.75% in July, 4.5% in September, 5% in November, 5.5% in December, 5.75% in March, 6% in May and the latest 6.25%. The average lending rate in 2021 was 2.5%.
On credit facilities, the interest rate (weighted average) on loans less than one year was seen increasing to 6.5% in May 2023 against 4.01% in May 2022; on loans from one to three years to 6.83% (3.37%); and on loans of three years and above to 7.1% (4.27%).
However, the QCB (on July 27) said there are various sectors that benefit from the non-increase in interest/return rates on the outstanding credit facilities in national banks.
The eligible sectors include private housing and consumption loans to Qatari citizens; service sector; industrial manufacturing; and trading sector. Within the services sector that ought to benefit include tourism, restaurants, hotels, entertainment, mechanical workshops, exhibition and machinery repairs.
Within the industrial manufacturing sector that ought to benefit include the segments such as food, clothing and leather, furniture and wood, bottled and canned soft drinks, and sanitary products.
Similarly, the QCB deposit rate has cumulatively jumped by 4.75% or 475 bps, increasing from 1% in January 2022 to 1.5% in May, 2.25% in June, 3% in July, 3.75% in September, 4.5% in November, 5% in December 2022, 5.25% in March 2023, 5.5% in May 2023 and 5.75% this July. The average deposit rate stood at 1% in 2021.
In terms of customer deposits, time deposits of one-month was seen surging to 2.74% in May 2023 compared to 1.52% in May 2022; three-month deposits to 5.46% (1.79%); six-month deposits to 4.84% (2.02%); one-year to 5.35% (2%) and more than one year to 4.54% (1.92%).
The weighted average overnight interbank interest rate (on riyal) noticeably shot up from January 2022 when it was 0.28%. In July 2022, it spurted to 1.68%, 2.62% in August, 2.61% in September, 3.7% in October, 4.31% in November, 4.68% in December, 4.97% in January 2023, 5.02% in February 2023, 5.12% in March 2023, 5.3% in April 2023 and 5.51% in May 2023.
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