Qatar has a bright economic outlook due to high oil prices but is at risk from inflation, and one way to contain this pressure would be to loosen the peg between the riyal and dollar, the International Monetary Fund (IMF) said on Friday.
The IMF noted in a regular review of the oil-rich Gulf nation's economy that its dollar peg had served it well so far, but urged Qatar keep an open mind.
"A few (IMF Board) Directors suggested that consideration be given to moving to a more flexible exchange rate regime to help curb inflationary pressures," it said in a statement.
It also noted that the riyal appeared to be in line with fundamentals on foreign exchange markets.
Buoyant oil earnings have helped Qatar's economic diversification into fields such as petrochemicals, financial services and tourism, while driving growth of 10 per cent in 2006 with a strong performance expected this year as well.
However, growth has come at a price. Inflation hovered around 12 per cent this year and is now a pressing issue.
"Although Qatar's medium-term prospects are very favourable, high inflation remains a concern and its reduction should be a priority," the IMF said. (Reuters)