Economic impact of Gulf diplomatic rift and Sri Lanka Featured

Published in Economy & Commerce
Source: Aljazeera Source: Aljazeera
With the ongoing crisis in Qatar and the Gulf Region as a country how Sri Lanka should react to such a situations is vital.

A continuous monitoring of the situation is essential from the government and the responsible authorities in order to safe guard the relationship between the two countries and also to ensure the security of the Sri Lankan community who reside in Qatar. According to the most recent demographic information there are approximately 145,000 Sri Lankans residing in Qatar, contributing to 5.6% of its total population. For Sri Lanka the prevailing situation is significant as this impacts the local economy, owing to the the Sri Lankan workforce in Qatar who contribute towards the foreign currency inflow to Sri Lanka. According to recent media reports of the Foreign Affairs Ministry of Sri Lanka, Ms. Maheshi Colonne the spokesperson for the Ministry said “so far there is no immediate impact on Sri Lankans in Qatar, but we are constantly monitoring the situation” .

Foreign media reports have indicated that the blocking of air and land routes in and out of Qatar could cost Gulf economies billions of dollars,a possible cause for concern with the impending threats posed on the economic stability across these nations. The Qatar stock market plunged 7.6 percent on Monday morning, while its main stock index fell more than 7.6 percent. Dubai stocks fell 0.7 percent and the main Saudi index also fell before reversing course to rise half a percent.

However, from Qatar point of view, as an optimistic note; The UAE is Qatar's biggest trading partner from the GCC but only its fifth largest - globally. Similarly, Saudi Arabia and other GCC countries traditionally account for only approximately 5 to 10 percent of trading on the Qatari stock market, according to exchange data, suggesting even a total pullout would not sink the market.

Desert states, by their nature, struggle to grow food; and food security is a particular issue for Qatar given the only way in by land, is a single border with Saudi Arabia. Every day hundreds of lorries cross the border, and food is one of the main supplies. About 40% of Qatar's food is believed to come via this route. Saudi Arabia has expressed intentions of closing this border when the lorries stop, thus leaving Qatar reliant on air and sea freight.

"It will immediately cause inflation and that will have a direct impact on the Qatari people," says Mr Nuseibeh the - President of Total E&P UAE. Possibly as a result of this statement, supermarkets on the streets of Qatar witnessed higher-than-normal activity, reported by Aljazeera. Some reported a sudden surge in customer inquiries from 11am local time (08:00 GMT).

"I think it's better to stock up on things my family and I need rather than being left out," a supermarket customer told Al Jazeera. A few currency exchange outlets that Al Jazeera visited also reported a jump in transactions on Monday

Many Gulf firms have a presence in Qatar, including in retail. Those stores are likely to close, at least temporarily, believes Mr Nuseibeh. "Indeed, we're already seeing business deals begin to crumble - major Saudi football team Al-Ahli has cancelled a sponsorship deal with Qatar Airways" said Mr. Nuseibeh

Some foreign bankers said the whole region could end up paying more to borrow if diplomatic tensions persisted.

“If this dispute goes on for a while, the ramifications could be huge,” said an international banker based in the Gulf, declining to be named because of political sensitivities.

In the meantime, the USA president Donald Trump sheds some light on the discussions held during his visit to Middle East, via a tweet on 6th June Saying “During my recent trip to Middle East I stated that there can no longer be funding of Radical Ideology.. Leaders Pointed to Qatar – Look!”.

Well, is this the beginning of the fall of another Gulf Nation? Only time can tell.