Reduce spending to fight inflation, Qatar urged

Qatar needs to slash public spending to tackle festering inflation although its budget is recording massive surpluses because of a surge in oil and gas revenues, according to a Western research company.

Apart from inflation, the sharp rise in expenditure has allied with a surge in the hydrocarbon industry and non-oil sectors to largely boost the Gulf country's economy, which is expected to gain at least $50 billion (Dh183bn) in the next four years, the Oxford Business Group (OBG) said in a report, quoting Finance Minister Yousef Kamal and several other Qatari officials.

As a result, Qatar has become one of the wealthiest nations on earth despite its high population growth, with its GDP per capita income peaking at $70,754 in 2007, OBG said, citing estimates by the Qatari Finance Ministry.

"Qatar is unlikely to find it hard to attract foreign investment, with the IMF projecting an average annual growth rate of 12.3 per cent between 2008 and 2012, with real GDP set to rise from an expected $83bn in 2008 to nearly $134.4bn by 2012," the report said.

"But bringing inflation under control is one of the major challenges for the future… restraint on current expenditure will need to be employed besides the phasing out of development expenditures as part of a tight fiscal policy and on-going efforts to address problems related to supply-side bottlenecks such as housing shortages," it added, citing official recommendations.

Qatar reeled under one of the highest inflation rates in the Arab world last year, standing at around 13.7 per cent, third only to Iraq and Yemen. Beside high public spending, Qatari officials have blamed surging rents and food prices, and the peg between the rial and the weak US dollar for inflation.

Official figures showed Qatar's public spending has rapidly grown over the past five years because of the surge in oil and gas revenues.

From around QR23.4bn during fiscal year 2002-2003, actual expenditure swelled to QR27.19bn during 2003-2004, to QR36.1bn during 2004-2005 and to QR50.83bn during 2005-2006. It jumped to QR66.36bn during 2006-2007 and QR78bn during 2007-2008. Spending was projected at a record QR95.9bn during fiscal 2008-2009.