New Qatar Emir Takes Aim At Inflation, Corruption

Qatar will use all available tools to contain inflation while cracking down on corruption and business monopolies, its new ruler said in his first major economic policy speech since taking office.

Sheikh Tamim bin Hamad al-Thani, who became emir in June when his father handed over power, was speaking to a government advisory council on Tuesday.

His remarks showed sensitivity to issues that could become politically controversial in the tiny but wealthy state of around 2.1 million people, about 250,000 of whom are local citizens. The speech also betrayed concern that Qatar’s huge construction plans should not destabilise the economy.

The 33-year-old emir, quoted by state news agency QNA, described inflation as the foremost problem associated with the rapid growth of the economy.

“No doubt that inflation has (a) negative effect on growth and society, and therefore price rise is a problem that worries everyone and the government will seek to contain it by all available means and tools,” he said.

“I mention in particular the monetary and fiscal policies, combating monopoly, encouraging competitiveness, setting an appropriate timetable to invest in major projects, and coordinating between these projects to avert being concentrated in a short period of time, leading to pressure on the available potential capacity.”

A government committee has been set up to propose ways to control internal and external inflationary pressures, Sheikh Tamim said, adding that individuals and institutions would be required to help in avoiding unjustified price rises. He did not elaborate on how the government would fight monopolies.

Inflation in the world’s top liquefied natural gas producer eased to 2.7 per cent year-on-year in September, the lowest level this year and well below a record 15 per cent hit in 2008, official data showed last month.

But analysts expect price pressures to pick up in coming years as the OPEC member envisages spending some $140 billion on an airport, a port, roads, stadiums and other projects before it hosts the 2022 soccer World Cup tournament.

Qatar’s fiscal spending has risen by over 24 per cent annually on average in the past decade as the country has expanded its gas producing facilities and infrastructure. But its ability to fight inflationary pressure with monetary policy is constrained by the riyal currency’s peg to the U.S. dollar.

In May, the Qatar Central Bank’s Director of Research and Monetary Policy Khalid Alkhater said the country and other Gulf states should consider moving to more flexible exchange rates to better manage inflation risks in the next decade.

A Reuters poll of analysts in September forecast average Qatari inflation of 3.5 per cent in 2013 and 4.0 per cent in 2014.

Sheikh Tamim also said people responsible for negligence, mismanagement or corruption would be held accountable – a sign that he saw the risk of waste and abuse in the billions of dollars of state contracts that will be awarded in the next few years.

“A study has to be made on the causes that raise the cost of some projects in Qatar in a way that does not conform with the cost and profit as well as supply and demand,” he said.

“And checking the cause of the rising cost of real estate and storage, and mismanagement that leads to the frequent change in the specifications of projects at the expense of the state, or in delaying them and stalling their implementation, then hastily implement them, with worse conditions that would increase the cost,” he added.

Since taking office, Sheikh Tamim has acted to assure his control of economic policy-making. Last month the government said companies must seek approval from the Ministry of Finance before undertaking any borrowing activity.

Several top economic jobs have changed hands since June including the posts of prime minister, finance minister, and the chief executives of sovereign wealth fund Qatar Investment Authority and Qatar National Bank.