This 2011 Article IV Consultation highlights that Qatar is using its fiscal space, generated from an increase in hydrocarbon production and prices, to implement a large public spending program. Large infrastructure investments are expected to sustain strong growth of 9 percent to 10 percent in the nonhydrocarbon sector in the medium term. The potential inflationary effect of the recent fiscal package is estimated to be about 1 percentage point. This underscores the need for fiscal policy to monitor aggregate demand and for the Qatar Central Bank to manage liquidity.

Abstract

This 2011 Article IV Consultation highlights that Qatar is using its fiscal space, generated from an increase in hydrocarbon production and prices, to implement a large public spending program. Large infrastructure investments are expected to sustain strong growth of 9 percent to 10 percent in the nonhydrocarbon sector in the medium term. The potential inflationary effect of the recent fiscal package is estimated to be about 1 percentage point. This underscores the need for fiscal policy to monitor aggregate demand and for the Qatar Central Bank to manage liquidity.

I. RELATIONS WITH THE FUND

(As of November 2011)

I. Membership Status: Joined 09/08/72;

Article VIII, 06/04/73

II. General Resources Account:

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III SDR Department:

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IV. Outstanding Purchases and Loans:

None.

V. Projected Obligations to the Fund:

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming

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VI. Implementation of HIPC Initiative:

Not applicable

VII. Safeguards Assessments: Not applicable

VIII. Exchange Arrangements:

The Qatari riyal has been pegged to the U.S. dollar at QR 3.64 = $1.00 since July 2002, following an unofficial peg that was in effect since June 1980. Qatar has accepted the obligations under Article VIII, Sections 2, 3, and 4(a) and maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions. Qatar maintains exchange restrictions for security reasons, based on UN Security Council Resolutions, that have been notified to the Fund for approval under the procedures set forth in Executive Board Decision No. 144-(52/51).

IX. Article IV Consultation:

The discussions for the previous Article IV consultation took place in Doha in November 2010. The Staff Report and its supplement were approved by the Executive Board on lapse of time basis on February 16, 2011. Qatar moved to a 12-month Article IV consultation cycle in 2007.

X. FSAP Participation, ROSCs, and OFC Assessments:

FSAP missions were conducted in January and May 2007. LEG conducted a detailed assessment of the Qatari anti-money laundering and combating the financing of terrorism (AML/CFT) framework against the Financial Action Task Force (FATF) 40+9 Recommendations, in February 2007. The report was also presented to the Middle East & North Africa Financial Action Task Force (MENAFATF) and the FATF and adopted by these organizations as their own mutual evaluation at their respective plenary meetings of April 2008 and June 2008. The final report was published on the Fund website and a ROSC was circulated to the Executive Board for information in September 2008.

XI. Technical Assistance:

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XII. Resident Representative: None

II. RELATIONS WITH THE WORLD BANK GROUP

The program of cooperation with Qatar is relatively recent: starting from 2003, the Bank has been providing technical assistance in various strategically important development areas based on ad hoc requests from the government. In February 2010, government, represented by the Minister of Economy and Finance, signed the Framework Agreement for Advisory Services with the Bank, which facilitates further development of the program and expanding it into new areas by streamlining legal processing of each project.

The program began in April 2003 with a Public Transport Sector Reform study. A manpower planning exercise launched in 2003 with the support of the World Bank evolved in 2004 into a Labor Market Strategy for Qatar. The study was completed in June 2005 and could serve as a model for the GCC countries with similar labor issues. The project made a significant impact in Qatar and was widely publicized by the government. In 2007, WBI conducted a study on the Knowledge Economy (KE) Development in Qatar, the results of which were discussed at several high-level workshops. During 2008 and the first half of 2009, the Bank continued to support the implementation of the strategy; recently, the government decided to take over further implementation of this program but expected the Bank to continue its support in certain areas of the KE development.

In 2005, the World Bank provided technical assistance on payment systems to the Qatar Central Bank, in the context of supporting the development of payment and securities clearance and settlement systems in the Arab region through the Arab Payments and Securities Settlement Initiative, led jointly by the World Bank, the Arab Monetary Fund and the International Monetary Fund.

Moving forward, the Government expressed a strong interest in further collaboration with the World Bank on a number of strategic issues, i.e., public-private partnerships, fiscal management, and macroeconomic modeling (RMSM-X). A recently completed program with the Ministry of Business and Trade addressed the issues of improving business environment; the findings and major conclusions will be discussed at a government workshop in Doha in January 2012.

In addition, the Bank conducts regular workshops that discuss GCC-wide cross-cutting issues. The workshop Partnering for Value, Innovation and Job Creation: PPPs in the GCC took place in May 2006; it concentrated on Public-Private Partnerships (PPPs) as an important tool for sustaining achievements of GCC economies. In February 2010, the Bank team helped the General Secretariat for Development Planning of Qatar to conduct a GCC-wide Economic Diversification Forum in Doha.

Ongoing projects

  • Environmental Action Program (Qatar National Component of the Gulf Environmental Program and Action Plan (GEPAP). This technical assistance supports the Ministry of Environment in implementing the environmental policies to achieve the objectives detailed in Qatar National Vision 2030. This activity links with the regional GEPAP, the main objective of which is to preserve, protect and promote long-term sustainable development for the Gulf region and its waterway

  • Business and Trade Development. The project objective is to develop specific policy measures and interventions for trade facilitation and export development to support high quality investments in Qatar. It aims to identify opportunities to (i) expand the range of markets into which existing export products are sold; (ii) upgrade the quality and value added of existing export products and (iii) expand exports of services.

  • PPP Development. The Ministry of Business and Trade (MBT) has developed a partnership between its PPP department and the World Bank. The objectives of the recently established partnership are to strengthen the capacity of the PPP department and develop a world-class PPP framework in Qatar. The program started with the diagnostic report and moved on to the action plan design and implementation support.

  • Macro Capacity Development. GSDP requested the Bank’s assistance with developing macroeconomic capacity, in particular, using RMSM-X modeling. The Bank retained a macroeconomist who developed the flow-of-funds model and trained several GSDP staff. Follow-up capacity building exercise is currently underway.

Completed projects

  • Linking Qatar’s Medium-Term Development Strategy to the Annual Budget (FY10).

  • Economic Diversification Forum (FY10)

  • Support to Labor Market Strategy Action Plan: Implementation (FY10).

  • Knowledge Economy Strategy and Implementation Assistance (FY09).

  • Workshop on “Partnering for Value, Innovation and Job Creation: PPPs in the GCC” (FY06).

  • A macroeconomic modeling workshop (FY06).

  • Evaluation of Qatar’s Payments System (FY05).

  • Labor Market Strategy (FY04)

  • Investment Climate Workshop (FY04).

  • Public Transport Sector Study (FY03).

III. STATISTICAL ISSUES

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Qatar: Table of Common Indicators Required for Surveillance

(As of December 5, 2011)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Daily (D), weekly (W), monthly (M), quarterly (Q), annually (A), irregular (I); and not available (NA).

Includes external gross financial asset and liability positions vis-avis nonresidents.

Qatar: Staff Report for the 2011 Article IV Consultation
Author: International Monetary Fund