Doha: Qatar's lenders need international banks to help finance as much as $88 billion (Dh323 billion) of construction for the 2022 soccer World Cup as local deposits fail to keep pace with loan demand.
Local banks' capacity to lend may be declining as a pickup in borrowing, particularly by state-owned enterprises, squeezes liquidity.
The ratio of Qatari credit facilities to deposits soared to 112 per cent in January from 91.8 per cent six months earlier in July, according to Bloomberg calculations based on central bank data.
The country with the third-largest natural gas reserves will need to fund stadiums planned for the world's most-watched sporting event, as well as hotels, roads, a bridge to Bahrain and a new city to house 200,000 people. Qatar Rail Co said it will tender as much as $14 billion in tunnelling and station contracts next month, part of a planned $38 billion rail system.
Limited scale
"In terms of overall size and substance compared to the projects which are coming out, we have a limited scale," Raghavan Seetharama, Doha Bank's chief executive officer, said in an interview in Doha.
"There could be the blend of international institutions as well as local banks when it comes to project finance."
Qatar's bonds have been rising as perceptions of the nation's credit quality improve. The cost to insure Qatari debt is the second lowest in the Middle East after Abu Dhabi, according to credit-default swap prices compiled by data provider CMA.
The contracts dropped 33 basis points in the two months ended March 21 to 114.4, according to CMA, which is owned by CME Group Inc and compiles prices quoted by dealers in the privately negotiated market.
The yield on the country's 4.5 per cent security maturing in January 2022 fell 29 basis points to 3.99 per cent in the two months to today. That outpaced the 20 basis-point drop through March 21 in the average yield for the HSBC/Nasdaq Dubai Middle East Conventional Sovereign US Dollar Bond Index.
Qatar was awarded the 2022 World Cup in December 2010, beating out the US, Australia, South Korea and Japan. The country pledged to build nine new stadiums, refurbish three others and construct training facilities.
A total of $9 billion will be spent on sporting facilities alone for the event, the government's planning board said in the October report.
Qatar also pledged to complete projects that were already planned, including the 40-kilometre bridge to Bahrain and the rail and metro system. Most of the work will be completed in seven years, Prime Minister Shaikh Hamad Bin Jasem Bin Jaber Al Thani said in December 2010.
Local banks have anticipated the construction boom by raising capital to ensure they can grab their share of loans. Doha Bank sold $500 million in bonds after meeting investors this month, while government-owned Qatar National Bank raised $1 billion in a debt offering last month. Barwa Bank, an Islamic lender that is the country's newest bank, completed a 1.7 billion-riyal rights issue earlier this year.
Bond sales
Al Khaliji, which created a contractor-finance division for the World Cup, and closely held International Bank of Qatar have both announced plans for bond sales of as much as $750 million.
Al Khaliji counts Qatari Diar Real Estate Investment Co, part of the sovereign wealth fund, as its biggest shareholder and International Bank of Qatar's chairman is the prime minister.
Masraf Al Rayan, Qatar's second-biggest Islamic law-compliant lender, projects 20 per cent lending growth this year, according to Chief Financial Officer Mohammad Salam Mursal. Total credit extended by Qatari banks surged 24 per cent in the year to January, while money supply advanced 11 per cent, central bank data show.
"Liquidity conditions in Qatar tightened by quite a bit in the second half of last year," said Nick Stadtmiller, head of fixed-income research at Emirates NBD.
