Treasury Sukuk launch by Qatar Central Bank is credit positive

Treasury Sukuk launch by Qatar Central Bank is credit positive

Fitch Ratings-Dubai/London: Qatar Central Bank’s (QCB) launch of Treasury sukuk is a structural improvement, says Fitch Ratings, as it provides domestic Islamic banks a venue to invest their excess liquidity. In the past, such short-term liquiditymanagement tools – in the form of Treasury bills (T-bills) – were only available to conventional banks, placing Qatari Islamic banks at a disadvantage as they couldn’t invest due to sharia restrictions. Qatari Islamic banks’ funding and liquidity profiles continue to be stable and Islamic banks’ market share continues to grow, reaching 27% at end-1H22. QCB issued QAR6 billion (USD1.6 billion) of T-bills and sukuk on 4 October 2022.

Qatari Islamic banks use Islamic liquidity-management tools including interbank placements, Islamic repurchase agreement, Qatar Money Market Rate Standing Facility, and maintaining reserves with QCB. Islamic banks also invest in Qatar government sukuk. However, the government sukuk has limited effectiveness as a liquidity-management tool due to its medium-to-long maturity, and the general buy-and-hold nature of sukuk investors.

The issuance is part of the first auction conducted under the enhanced auction procedures introduced in September 2022. QCB increased the number of Treasury instruments, including Islamic instruments, and launched shorter-tenor T-bills and sukuk, of one week and one month. T-bills and