IMF Staff Completes 2022 Article IV Mission to Qatar

IMF News, March 7, 2022

Source details

IMF team led by Ms. Ran Bi conducted the 2022 Article IV consultation from February 13 to March 1, 2022.
Press release date: March 7, 2022.
End-of-mission press release conveys preliminary findings of IMF staff; views are those of IMF staff and do not necessarily represent the IMF’s Executive Board.
IMF team met with Minister of Finance H.E. Ali bin Ahmed Al Kuwari, Governor of the Qatar Central Bank H.E. Sheikh Bandar bin Mohammed bin Saoud Al-Thani, other senior officials, and representatives of the private sector.

Near-term growth drivers:
- 2022 FIFA World Cup preparation.
- Favorable hydrocarbon prices.
- Ongoing LNG expansion project (North Field) supporting medium-term prospects.
Growth projection:
- Real GDP growth is expected to accelerate to 3.2 percent in 2022.
Downside risks listed:
- Potential new virus strains.
- Geopolitical tensions and conflicts.
- Tighter and more volatile global financial conditions.
- Energy market volatility.
- Long-term risk: global shift to renewables could reduce demand for hydrocarbon despite LNG easing energy transition.

Current position:
- Banking sector described as well-capitalized and liquid.
- Non-performing loans (NPLs) at relatively low levels.
- Banks have large and increasing exposure to foreign liabilities.
- Strong state support provides the last line of defense; sovereign contingent liabilities could increase.
Recommended actions:
- Carefully manage exit from remaining financial sector support measures.
- Planned gradual reduction in the allocation for the zero-interest repo facility is welcomed.
- Exit from the blanket loan moratorium in the near future is appropriate given recovery strength; replace it with time-bound support measures targeting distressed but viable borrowers.
- Resolve unviable firms through an enhanced insolvency framework.
- Continue diligent banking supervision, including prompt recognition and addressing of NPLs and compliance with provisioning and capital requirements.
- Prudential measures and reforms to promote domestic stable funding, and efforts to lengthen maturity and diversify sources of foreign funding, to mitigate risks.
- Prudent public finance management and reduced public sector footprint in the domestic banking sector to avoid crowding out private credit.

Fiscal context:
- Rising hydrocarbon prices and a favorable fiscal outlook.
- Authorities committed to medium-term fiscal consolidation.
Recommended fiscal strategy:
- Pursue a balanced and growth-friendly consolidation to achieve intergenerational equity and diversification.
- Diversify revenues and accelerate implementation of the value-added tax (VAT).
- Enhance current spending efficiency and reorient spending to promote productivity, economic diversification, and a greener economy.
- Underpin implementation with a well-designed medium-term fiscal framework (MTFF) and enhanced fiscal transparency and governance.

Reforms achieved:
- Abolished Kafala and introduced a mandatory minimum wage and allowances for food and housing (first among GCC countries).
- Introduced reforms to boost foreign and private investment, improve productivity and competitiveness.
Climate and environment:
- National Environment and Climate Change Strategy envisages a 25 percent reduction of trend greenhouse gas emissions by 2030.
Recommended continuation:
- Continue strong reform momentum to improve productivity and inclusiveness, enhance the business environment, attract private investment, and embrace digitalization and green growth for more diversified and stronger long-term growth.

The Qatari authorities’ swift and decisive COVID-19 response minimized health and economic impacts and facilitated recovery through proactive containment, massive testing, strong healthcare, fast vaccination rollout, and a comprehensive economic support package.
Policy priorities to secure recovery and foster stronger, more diversified growth:
- Carefully manage exit from remaining financial support measures while safeguarding banking sector strength.
- Embark on a growth-friendly medium-term fiscal consolidation.
- Further advance structural reforms to achieve Qatar National Vision 2030 goals.

IMF Press Release No. 22/63, March 7, 2022