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Photo for illustrative purposes only.

Qatar is “well-positioned” to manage the impact that lower oil prices have had on its revenue, the International Monetary Fund (IMF) has said.

The country has taken the necessary first steps to handle new deficits by cutting expenditures and diversifying its economy, the IMF added in a recent assessment.

Though there is a risk of rising inflation and continued lower oil prices, the fund has expressed confidence in Qatar’s economic future.


Qatar: Selected Economic and Financial Indicators, 2013–2018

That said, it still forecast the cost of living (CPI) in Qatar to rise from 2.6 percent currently to 5.7 percent by 2018.

This is likely due to the upcoming rollout of two new taxes in Qatar, a value-added one and a selective tax on fast food, luxury goods and other items.


One indicator of Qatar’s economic health has been its GDP. It rose from 2.7 percent in 2016 to an expected 3.4 percent this year, thanks to investment in infrastructure projects.

To keep things running smoothly, the IMF offered several suggestions to authorities.

Reem Saad / Doha News

The price of petrol rose five months in a row before leveling off in April.

For example, it urged Qatar to continue its plans to cut subsidies, lower spending and roll out its new taxes.

The IMF also encouraged Qatar to do more to ensure it is efficiently managing its investments. And it suggested further transparency is needed when explaining the country’s fiscal position.

Other ideas included:

  • Enhancing anti-money laundering efforts to combat the financing of terrorism;
  • Strengthening banks by developing a more “active liquidity forecasting framework”; and
  • Improving Qatar’s business environment through labor market and education reform.



Muhammad Kamran Qureshi


The International Monetary Fund (IMF) has warned Qatar and other countries in the region to proceed carefully as they begin the delicate task of reducing subsidies and rolling out new taxes to plug deficits in government budgets.

Qatar, like other countries in the region, has “maintained social cohesion” by redistributing some of the proceeds from its sale of oil and natural gas to residents through generous public services and artificially low prices for water, electricity and petrol.

In recent years, the government has also given large raises to nationals employed in the public sector.

However, the slump in global oil prices has eroded government revenues and prompted the Ministry of Finance to project that Qatar will run a QR46.5 billion deficit this year.

For illustrative purposes only.


For illustrative purposes only.

Efforts are now underway to reduce spending by slashing the budgets of state-funded organizations, for example.

But the IMF said in a report released late last week that governments across the region need to be selective in where they make cuts:

“It will require difficult choices and adjustments in the implicit social contract between governments and citizens, not least because spending on items such as wages and social benefits tends to be rigid and difficult to cut,” the IMF said in the document, titled, Learning to Live with Cheaper Oil.

“Policymakers will need to implement measures in a way that minimizes the adverse impact on growth, while maintaining social cohesion, including by protecting essential spending on health, education, and other high-return categories, and by protecting the vulnerable segments of population.”

Spending reductions

Qatar’s senior leaders began hinting last year that belt-tightening measures were on the horizon.

Last November, the Emir, Sheikh Tamim bin Hamad Al Thani, used his address during the opening of a new Advisory Council session to warn that the government could no longer “provide for everything.”

Sheikh Tamim at opening of the Advisory Council.


Sheikh Tamim at opening of the Advisory Council.

Since then, petrol prices have been hiked and long-discussed plans to introduce a value-added tax appear to be gaining momentum.

Elsewhere, the government has increased user fees for some services, such as sending letters and parcels.

However, Qatar appears to be moving slowly in introducing reforms.

For example, after an initial hike in January, petrol prices have only marginally increased.

And, in an effort to prevent the price of essential consumer products from rapidly rising, GCC finance ministers have agreed to exempt 94 food items, as well as education and health services, from future consumer taxes.

Meanwhile, patients here continue to pay only a nominal fee for government hospital stays and other medical care.

Still, Qatar has attempted to reduce healthcare spending by laying off hundreds of employees at state health provider Hamad Medical Corp.


Photo for illustrative purposes only.


Photo for illustrative purposes only.

As Qatar continues to up spending on domestic real estate and infrastructure projects, the state and its Gulf neighbors are facing a warning to reduce expenditures as oil prices fall.

In a meeting of GCC finance ministers and central bank governors in Kuwait yesterday, the head of the International Monetary Fund said that oil prices, which have fallen approximately 25 percent since the summer, “increases the urgency for fiscal consolidation.”

Al Bayt (Al Khor) Stadium rendering


Al Bayt (Al Khor) Stadium rendering

IMF managing director Christine Lagarde’s comments come as construction on the Doha Metro, Msheireb Downtown redevelopment and several World Cup football stadiums ramps up.

While these and other mega-projects, such as the Pearl-Qatar and various highways, have helped diversify the country’s economy away from hydrocarbons, many of the developments are being paid for by the government.

Qatar relies more on exports of natural gas than oil, but prices of the two commodities are correlated. The IMF estimates that Qatar needs oil prices to stay above US$77.60 a barrel to continue running a budget surplus.

Brent oil futures closed Friday at $86.13, while a basket of prices among OPEC nations ended at $81.67 a barrel. The drop in prices has been attributed to less demand due to predictions of weak global economic growth.

Gadget Dan/Flickr

Qatar typically takes lower oil prices into account when setting its annual budget, which often results in revenues coming in much higher than predicted. For its most recent budget, Qatar assumed oil would sell for $65 a barrel.

But higher-than-expected expenses have eroded that cushion in recent years. In 2013-14, government expenditures were more than 9 percent, or QR21 billion ($5.78 billion), higher than budgeted, according to the Qatar Central Bank (QCB).

This means that lower natural resource revenues could present challenges for Qatar’s government, which reportedly rescheduled 15 percent of its development projects earlier this year among rising costs, among other hurdles.

Where Qatar get its money

The exact impact of declining oil prices on Qatar’s public finances is unclear. The country has diversified its sources of revenue and could likely tap debt markets and borrow more money if needed.

A growing share of government revenue is coming from investment income as well as Qatar’s 10-percent corporate tax, according to a recent report by Qatar National Bank.

Omar Chatriwala / Doha News

From 2013-14, income from oil and gas made up 56.3 percent of the government’s revenues, which totaled QR346 billion ($95.2 billion), according to the QCB. Investment income made up 29.7 percent.

According to Kuwait’s state news agency, the IMF’s Lagarde said Gulf countries could mitigate the risks posed by declining oil prices through replacing across-the-board subsidies with measures targeted at those who are most in need.

“That is a good way to re-orientate public spending,” she said.

Kuwait has repeated this message to other GCC members and has also called for reductions in government wages to help cap public spending.

In Qatar, there’s been no public suggestion by officials that the country is considering a reduction in subsidies or has plans to clamp down on government salaries and wages, which climbed 19.7 percent in 2013-14.


But in one of his first national addresses, Emir Sheikh Tamim bin Hamad Al Thani promised to cut the fat in government.

While no figures have officially been disclosed, the budgets of the Qatar Museums and the Doha Film Institute, among other organizations, are believed to have been drastically reduced.

Elsewhere in the Gulf, Oman appears to already be moving in this direction. The country’s minister for financial affairs told Reuters on the sidelines of the weekend’s meetings that declining oil prices will push Oman to likely start cutting state subsidies next year.