Gulf central banks take steps to guard against credit defaults

Gulf states are moving to protect their economies from a war-driven credit squeeze, as central banks in Qatar, the UAE and Kuwait roll out measures to keep loans flowing and prevent a broader financial shock. 

Qatar’s central bank has allowed banks to defer loan repayments for up to three months for affected businesses and individuals, while instructing lenders not to impose penalties during the relief period, Bloomberg reports. 

The move is aimed at easing immediate liquidity stress as companies face delayed shipments, weaker demand and rising insurance and financing costs.

In the UAE, authorities have taken parallel action by easing capital requirements to ensure credit remains available, particularly for small and medium-sized enterprises exposed to supply chain disruptions. 

Kuwait has also signaled support for its financial system, with policymakers indicating readiness to step in to stabilize markets and assist businesses if conditions worsen.

Gulf central banks chop interest rates in tandem after Fed cut

The U.S. Federal Reserve’s decision to cut interest rates set off a chain reaction of parallel reductions in the Middle East.

Central banks in Saudi Arabia, the UAE, Bahrain and Oman, which have currencies pegged to the U.S. dollar, chopped their own borrowing rates today by 0.25% in tandem with the Fed, Reuters reports. Qatar cut its three main interest rates by 0.30%.

The Fed’s action on Wednesday produced a sour reaction, however, on Gulf stock exchanges, which dropped in morning trading with other global markets as traders absorbed the message from Federal Reserve Chairman Jerome Power that rates cuts will be slower in 2025.

Benchmark indexes lost ground in Riyadh, Dubai and Abu Dhabi. Qatar’s market was closed for the country’s National Day.