Qatar burns almost $40bn of reserves to live through blockade – Moody’s
Qatar has spent over 11 percent of its reserves in just three months after its Gulf neighbors led by Saudi Arabia imposed a blocked over Qatar’s alleged support of terrorism, Moody’s reports.
According to the report, Doha used $38.5 billion, or 23 percent of GDP, to prop up the economy and financial system in June and July. It is more than 11 percent of its $340 billion financial reserves.
On June 5, Saudi Arabia, the United Arab Emirates, Bahrain, Egypt and other countries severed all diplomatic and transport links with Qatar, accusing the state of backing terrorism. Qatar has denied the allegations.
Qatar is forced to import food and other products from Turkey by plane and from Iran by ship.
"In the short term, we expect tensions to persist, quite possibly to escalate. The severity of the dispute is unprecedented," Moody’s said in the report.
While the blockade is targeted at Qatar, it hits all six Gulf Cooperation Council (GCC) countries, the agency said.
"While we expect the GCC to overcome its divisions, tensions persisting — or even escalating — would be the most credit negative for Qatar and Bahrain," Moody’s said.
Trade, tourism, and banking in Qatar have received the greatest damage so far. Imports have plunged 40 percent, compared to last year.
Qatar is also facing problems in constructing stadiums for the 2022 World Cup, as the country imports about 70 percent of materials from Saudi Arabia and the UAE, according to Moody's.
AP reported it has seen a list of demands from Qatar's neighbors if it wants sanctions lifted. They include reducing diplomatic links with Iran, shutting down the state-funded Al-Jazeera TV channel, and cutting ties to all “terrorist organizations,” including the Muslim Brotherhood and Lebanon’s Hezbollah.
