Essay Example on Qatar Riyal: Currency, Exchange & Historical Background

Introduction

The currency code of the Qatar riyal is QAR. The state of Qatar is currently located along with the cost of the Arabian Peninsula. One Qatar riyal is comprised of 100 dirhams. The abbreviation for the currency is QR. The Qatar riyal is also known as the rial. The Central Bank of Qatar gives all Qatar exchange means. The objective includes financial consultancy and the supervisory controller of the coinage.

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Monetary System in Qatar

Historical Background

Before the year 1966, currencies and the financial exchanges that took place were purely associated with the sterling pounds. Some of the monetary coins that were in existence were the Indian Rupee and the Gulf Rupee. After some time, the Indian and the gulf rupee were devalued by 35% a feature that made the Qatar administrations decide to use the Saudi Riyal (Alshamari, 2017). The Saudi riyal was used as an interim of transactions until the issuance of a new currency. In the same year, 1966March 21stch, Qatar, and Dubai signed an agreement on money, and they named the currencies Qatar-Dubai Riyal (QDR) (Alshamari, 2017).

Come to 1972nd December, Dubai became a part of the United Arab Emirates. After merging the policies and agreements, there was a need to relinquish Qatar's Dubai currency, according to Amiri Decree number 6, that was enacted officially in the year 1973 in May (Naheem, 2017). The financial prospects of Qatar seemed bright after law number 7 was pronounced hence establishing the Qatar Monetary Agencies who later the same month assumed duties of the central bank. Later on, Amiri Decree number 24 of the same year 1973, was put in place permitting the redemption of QDR and the issuance of a new currency that is currently known as the Qatari Riyal which could be equated with the same value against gold as the QDR (Roberts, 2017).

Monetary policy goals

Monetary policy goals came into being in the year 1993, and the Qatar Central Bank acquired the Qatar money Agency's financial outline to check on the exchange rates. The formal framework for the exchange rates policies if a constant and concrete comparison between the Qatar riyal and the US dollar (Naheem, 2017). Again, the nature of the QCB in the monetary system is made to ensure and draw the short-term interbank rates to have a static uniformity between the QR and the USD (Roberts, 2017). The interest rates designed by QCB frameworks always aim at focusing on the average overnight interbank charges as the working marks. The objective is to have the AOIR and the QCBDR aligned on a liquid management operation (Naheem, 2017). The critical components of monetary policy operations are the commercial banks and, most importantly, the current deposit accounts with the QCB because they can be liquidated and used as modes of payments at the banks. The aggregate of the current deposit accounts is referred to as primary liquidity or liquidity (Roberts, 2017).

Monetary Policy Tools

Various tools have been incorporated to help run the financial markets within Qatar. There is the QCB rate is the set charges on return set by the Qatar Central Bank (QCB) for the everyday transactions carried out in the Qatar money markets. In the mid-1970s, QMA increased the QR in contrast to the USD several times, so there could be a balance and stable value over other significant currencies. These included the sterling pounds and the Euros who are the Qatar trading partners and to ease of the brought about inflations. Over four years (1976-1980). To be precise, the QR was augmented twelve times against the USD. The QR has balanced the value for 8.5%, paying for 13.4% depreciation that previously happened in the value market against SDR. In July of 1980, there was a recommendable trend on the upward trend over the other major currencies. QMA tried its best to maintain the pattern and exchange rates of unaltered USD over 3.64 QR. Qatar's central bank has realized and embraced the QMA financial strategies that aim at targeting the exchange rates. To have a clear understanding of the QCB, they have adopted the trends of making sure the USD's rise and decline are just in line with the QR and at the rate of QR3.64 per USD.

Financial and Banking System

The economy of Qatar has gone through significant progress in several economic and social fields. Recently, the administrative power has come up with favorable policies putting into consideration the free market principle. From the structures of the national economy, it is very evident on the support the government has put in place. The policies are designed to cater to the economic changes with the county's best interests. The financial institutions show the same through their quick responsiveness and to the achievements put forth by the economy of Qatar regarding the economic variables.

The central bank of Qatar

Qatar's central bank was established in the year 1993 and authorized by the constitution to be the bank of the government and the central financial institution to lead the other banks in managing and maintaining monetary policies of the country. Its returns are realized and elevated following the development experienced by the national monetary and lending segment.

Investment System in Qatar Exchange

The investment systems have been established in a way it accommodates all people from all walks of life. GCC citizens can only invest up to 25% (Bandirali, 2018). The laws were put in place as soon as May 29th, 2002. It was to ensure the non-Qatari investors can invest in the Qatar exchange and be involved in companies that have shared with the Qatar exchange. Some of the mutual funds include; Al Waseela Fund, Al Watani Fund II (WATANI2), and Qatar Gate Fund (QGF) (Bandirali, 2018).

Qatar Financial Markets Authority

QFMA, known as the Qatar Financial Markets Authority, is an independent body within the government agencies that act as Qatar securities and market regulators. QFMA has been in pursuit of setting a strong groundwork meant to create a non-matched capital market in Qatar state a feature that will enable the top essential sites in and around the region.

Commercial Banks

In Qatar, the operations are dedicated to 20 commercial banks. Among the 20, 12 are national banks, 4 are Islamic banks, and they all operate in 223 local branches.

Exchange Companies

Qatar is a rich country ad; there are well-established exchange companies that significantly play an essential role in meeting people's needs in and around the region despite their race. Some of the transactions conducted are for foreign currencies and precious metals for different purposes. Some exchanges serve purposes related to meeting the invisible economic trades. There are approximately 20 exchange corporations in Qatar.

Insurance Companies

Insurance companies are some of the significant entities within the financial sectors of a business and, more so, the banking systems. Demand for insurance has grown over the last two decades and thus giving rise to companies looking forward to increase significantly without the worries of losing all the possessions—the various covers such as accidents, fire, sea insurance, and over natural calamities and such features. There is a population of 10 insurance companies in Qatar, whereby the government owns 5 of the totals, and the remainder is agencies or categorized as branches of Arab or foreign insurance companies.

Describe the currency exchange rates and any significant economic impacts on the exchange rates.

QMA has been dedicated to maintaining stable QR exchange rates against and the one that is dynamic in conversion to other currencies. In the year 1975, As per article Number 60 of the 1975 constitution, the QR was attached to the Special Drawing Rights (SDR). The SDR took effect at a rate of 0.21 per QR at an allowable fluctuation of ± 2.25% (QR 4.7619 ± 0. 2.25% per an SDR unit). Between 1973 and 1993, Qatar came up with an intervention of the US dollar to fix the daily value of the QR. The QR exchange rates were carried to be the determinants of the latter's exchange rate in contradiction of the SDR as resolute by the IMF.

The international financial fields, the US dollars is the metric to address QR exchange rates in comparison to other currencies. The flux margin of the QR against the SDR was increased ± 7.25%. In early 1976 as of the indebtedness of the USD in contradiction of SDR in late 1975. Therefore, the QR exchange rates developed in changing the currencies over the USD.

The disengagement between the Qatari riyal and the dollar has gotten the second most exceedingly awful decision for the "Hamdeen" after the choice of exchanging the advantages of the sovereign and non-sovereign Qatari sovereign store to stop the exhaustion of stores. Yet, all concur that the impacts are obliterating and the breakdown of the last bastions of the Qatari economy (Tok et al., 2016). The Qatari riyal is as of now under phenomenal tension in significant universal trade markets, for example, London, Paris, and New York because of the vulnerability that has grasped the Qatari economy since the blacklist it declared. The Kingdom of Saudi Arabia, UAE, Bahrain, and Egypt as a result of the inclusion of Doha with the help and financing of fear-mongering, provoking banks the world over to quit exchanging Qatari Riyals for retail clients, under mounting tension forced by the emergency on the cash in which it is thinking about critical currency (Cafiero, 2019).

The decoupling of the Qatari riyal and the US dollar involves time, examiners stated, exhorting financial specialists in Qatar to move a portion of their resources for different monetary forms. Qatar's national bank declaration indicated that the net outside trade holds fell 30% to $ 24.4 billion in June from $ 10 billion in June (Cao, 2016). This speaks to a month to month decay of QAR 14 billion or what might be compared to $ 4.12 billion). The coming months will look at an expansion in the seriousness of the fast disintegration of money related holds. It is because of the exceptional expense of food imports, a 40% drop in imports, the decline in the Qatar Securities Index, the sharp decrease in land costs, and the loss of transport and neighborliness parts (Tok et al., 2016).

It will not take long for the worldwide money-related segment and outside financial specialists to lose the remainder of Qatar's delicate trust, particularly after Moody's minimized Qatar's FICO score because of the nation's powerless outer position and the vulnerability encompassing the manageability of the development model (Cao, 2016). As the selling pressure on the Qatari riyal, which has not fallen against the dollar for a long time and the withdrawal of outside stores from banks, escalated, the national bank had to intercede as a dollar broker (Tok et al., 2016). The circumstance compounded the same number of global banks quit exchanging the Qatari cash (Cafiero, 2019). It is assessed that the proceeded with a peg of the Qatari riyal to the dollar necessitates that the stores stay more significant than the $ 17 billion money volume, which implies that the Qatari cash is genuinely compromised after the national bank's moving edge is excessively close (El-Masri, and Tarhini, 2017).

Doha has close to brief arrangements. The first is the decoupling of the Qatari riyal and the dollar, an alternative that could stop exhaustion of stores; however, its belongings would be huge for trust in fiscal soundness (El-Masri, and Tarhini, 2017). The second is the utilization of the Fund's fluid resources and the liquidation of what can be exchanged with regards to its cash. As per specialists, it is costly and not ensured because Qatar Investment Authority resources are evaluated at $ 300 billion (Tok et al., 2016). The dollar...