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Qatar seeks to deepen local debt market with QR24bn sale plan amid spend drive

January 19, 2014

A general view of the Qatar Central Bank in Doha . The QCB plans to sell QR11bn of sukuk, which comply with the ban on interest, and QR13bn of non-Shariah compliant bonds, according to a statement on its website. Bloomberg / Doha /Dubai Qatar plans to offer more than $6.6bn in local currency bonds and sukuk, the largest sale in three years, as the country seeks to deepen its domestic debt market in the lead-up to hosting the World Cup. The Qatar Central Bank will sell QR11bn ( $3bn ) of sukuk, which comply with the Shariah ban on interest, and QR13bn of non-Shariah compliant bonds, according to a statement on its website. The sale plan is the biggest since January 2011 , when it issued 50bn riyals of securities. Qatar , the world's largest exporter of liquefied natural gas, is developing its capital market amid projects worth about $200bn that include stadiums, roads and hotels in preparation for the 2022 soccer World Cup. Borrowers may turn increasingly to investors for financing as the nation looks for ways to rein in government debt. " Qatar has a plan to really establish a local currency debt market, and to do that the government must start it and lead," Mohammed Ghiyath Sheikhah, first manager for international investment and finance at Doha -based International Islamic, said by phone on Monday. "For that a small amount does not make sense." The country in December sold 500mn riyals of Islamic bonds due 2018 with a profit rate of 3%. That compares with an average yield on sovereign sukuk in the Middle East of 4.91%, according to JPMorgan indexes. Qatar sells QR4bn of short-term debt every month and in March began selling the same amount each quarter to local banks in three-and five-year tenors. The notes can be sold by lenders but are typically held, according to Ahmed Shehada , head of trading at QNB Financial Services . "This bigger issue could be an effort to incentivise banks to start to release some of what they hold," he said by phone from Doha on Monday. "We are seeing more foreign interest in Qatari paper. This sale is about development of the debt curve and giving foreigners greater access to riyal debt." Qatar's government and companies are tapping debt markets as the nation embarks on $138bn of investments by 2016. Domestic debt alone is unlikely to cover all of Qatar's infrastructure spending plans, according to Amol Shitole , a credit analyst at SJS Markets Ltd. "It has to be a diversified mix of financing," he said by phone from Bangalore, India , on Monday. "The strategy to finance big projects must provide a cushion in case the prices of oil and gas decrease" and government revenues fall, he said. Dollar bonds from Qatari companies are in demand. Investors placed orders worth about $5bn for telecommunications provider Ooredoo's $1.25bn sukuk sale in November. The Qatari government last sold dollar sukuk in July 2012 . The nation's gross debt reached 36% of gross domestic product in 2012, according to the International Monetary Fund . The government requires state-run companies to obtain Finance Ministry approval before borrowing from banks, an official said in November. " Qatar's local debt market is now the most active in the region after Saudi Arabia," Shitole said. "Developing it further is a smart move given the spending they have lined up."

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Source: Gulf Times (Qatar)

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