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Thursday, July 29, 2021

IMF: Qatar must create ‘credible budget’ – and stick to it

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To protect itself from inflation and ensure its stability in the long run, Qatar must create a credible annual budget – and stick to it, a new report from the International Monetary Fund has said.  

The report hailed Qatar for being the only GCC country thus far to pursue planning in the medium term with a three-year budget, but also acknowledged that the volatility of hydrocarbon prices makes predicting the country’s revenues a challenge.

Because such uncertainty cannot be avoided, Qatar must temper it by spending only on projects that it has budgeted for in the medium term, the report advises:

An unconstrained country like Qatar can indeed afford to spend more in relatively bad times (for instance from returns on accumulated financial assets). The key challenge is then to revert the fiscal expansion in good times, to avoid spending pressures, and instead to save more, thus preventing fiscal policy from amplifying the boom in business cycles.

It also recommended “transparency and accountability mechanisms through which adherence to stated medium-term objectives can be assessed by “outsiders.” 

Inflation concerns

To avoid inflationary hikes, attention must also be turned to the housing market, Qatar’s IMF Mission head Ananthakrishnan Prasad told Gulf Times:

“In the current situation, there is an oversupply in high-end luxury housing segments, and an undersupply in affordable housing,” Prasad stressed. 

“The authorities would need to satisfy the expected growing demand from the low-to middle-end segment of the real estate market.” 

Meanwhile, Qatar’s economic growth is expected to slow to 5.2 percent this year from 6.6 percent last year, due to the declining trend in crude oil production and exports, as well as increased spending on infrastructure, the IMF said.

Here are some of the recommendations:

Thoughts?

Credit: Photo by Tax Credits

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