Monetary Policy Tools

Introduction

Since its inception in 1993, Qatar Central Bank (QCB) inherited the Qatar Monetary Agency's monetary framework of targeting the exchange rate. The formal framework for the exchange rate policy is a fixed parity between the Qatari riyal (QR) and the United States dollar (USD) at QR 3.64 per USD. Hence, the de facto QCB's monetary policy objective is to keep the QR stable against the USD. Consequently, QCB's monetary policy is drawn and implemented to manage the short-term interbank rates with a view to sustain the fixed parity between the QR and the USD. The current QCB interest rates framework focuses on the average overnight interbank rate (AOIR) as the operating target. The aim is to align the AOIR within the QCBDR through liquidity management operations.

Monetary Policy Committee

The primary responsibility of Monetary Policy Committee (MPC) is the formulation and implementation of QCB's monetary policy. The Governor chairs the MPC. Assistant Governor of the Financial Stability Sector is the Deputy Chairman and the other members are Assistant Governors of Corporate Services, Financial Settlements and Payment System, Supervision, Reserve Management. The Directors of the Financial Stability and Surveillance and Monetary Policy as well as the Advisors to the Governor and expert at the Reserve Management are also members of the MPC committee. The Monetary Policy Department at the Financial Stability Sector acts as the Secretariat of the MPC. The MPC meets every six weeks and additional meetings are held, if required. Monetary Policy Division at the Monetary Policy Department continuously monitors the QR interest rates in the context of developments in the international interest rates, in particular, the US Federal Funds Rate, and reports to the MPC. Decisions taken by the MPC are announced to commercial banks operating in Qatar and to bank public via QCB website and social media.

The monetary policy rates in the Qatar Central Bank are

QCB deposit rate (QCBDR) is the official short-term (overnight) interest rate set by the QCB, at which banks earn interest when they deposit funds with the QCB.

QCB lending rate (QCBLR) is the official short-term (overnight) interest rate set by the QCB on the banks' liquidity borrowing from the QCB.

QCB repo rate (QCBRR) is a collateralized lending facility between QCBDR and QCBLR. Repo Rate is the rate at which the QCB provide liquidity to commercial banks against the collateral of government securities and other QCB-approved securities. The repo (repurchase agreement) involves the purchase of securities by the QCB with an undertaking to reverse the transaction at an agreed date in the future and at an agreed price.

Required Reserve

Banks retain with QCB amounts of compulsory reserves equal to a certain percentage of the average total deposits held by them. The ratio is calculated based on average total daily deposits on the sixteenth day of each month until the twelfth day of the following month. The amount of reserves approved applies at the start of the fifteenth day of each month. The amounts of such reserves are non-interest-bearing.

QCB has adopted the exchange rate policy of its predecessor, Qatar Monetary Agency, through fixing the value of the Qatari Riyal (QR) against the US dollar (USD) at a rate of QR 3.64 per USD as a nominal anchor for its monetary policy. The peg has always been highly credible. The targeted peg was officially authorized by Amiri Decree No. 34 of 2001 issued in July, substituting the de jure exchange rate policy of pegging to the SDR that was in effect since 1975.

To date, QCB has continued implementing its exchange rate policy of hard pegging to the USD at an average price of QR 3.64 per USD. Commercial banks domestically trade the USD on basis of price determined by QCB. Nonetheless, commercial banks add a small margin of 0.24% to the QCB fixed price when dealing with the public. Otherwise, commercial banks trade other currencies based on QCB determined exchange rate of QR against the USD and market determined exchange rate of a given currency against the USD. Table 1, provides a historical summary of the exchange rate regime implemented in Qatar. For further discussion, see Exchange Rate Policy in Qatar under Publications.

Chronology of QR Exchange Rate

Period	Currency in Circulation	Peg	Exchange Rate QR per Sterling Pound/SDR/USD
Prior to June 1966	Indian Rupee and Gulf Rupee	Linked to Sterling Pound
June-September 1966	Saudi Riyal
18th September 1966-November 1967	Qatar-Dubai Riyal	Sterling† Pound	13.3333
November 1967-August 1971	Qatar-Dubai Riyal	Sterling Pound	11.7647
23rd August 1971	Qatar-Dubai Riyal	USD	Par value against gold at 0.186621 gms of fine gold
19th May 1973-March 1975††	Qatari Riyal	USD	Par value against gold at 0.186621 gms of fine gold
March 1975-14th Jan 1976†††	Qatari Riyal	SDR	4.7619±2.25%
15th Jan 1976- July 2001	Qatari Riyal	SDR	4.7619±7.25%
From July 2001 till date††††	Qatari Riyal	USD	3.64

† The par value of QDR was fixed at 0.186621 grams of fine gold.

†† Decree No. 72 of the year 1974; pegged QR to USD with retrospective effect from 19th May 1971.

††† As per Decree No. 60 of the year 1975.

†††† As per Decree No. 34 of the year 2001.

Monetary Policy Tools

Introduction

Monetary Policy Committee​

The monetary policy rates in the Qatar Central Bank are

Required Reserve

Monetary Policy Committee