International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper focuses on policies to drive diversification for Qatar. Diversification is important for a large commodity exporter like Qatar: it helps manage temporary shocks and prepare for sweeping changes to the economic setting. Qatar’s large financial holdings can help diversify revenues. Both structural reforms to improve the business environment and sector-specific policies can support diversification of activity and exports. Sector-specific policies should build on existing economic strengths in areas with room for exports and innovation. Emphasis should be placed on developing expertise in specific clusters. Export markets and competition provide crucial mechanisms to ensure discipline. Further diversification is important to help Qatar manage temporary shocks and prepare for far-reaching shifts to the economic context. Well-targeted, structured, and sequenced policies to encourage specific sectors can also play a role in diversifying Qatar’s economy. Export markets and competition should be deliberately used to hold recipients of support accountable. Policies to encourage specific sectors have resulted in little more than inefficient import substitution in many countries. Avoiding this outcome requires discipline: support should be withdrawn in the absence of progress.
EXECUTIVE SUMMARY A transition government has been put in place to lead the country to elections in October 2015 and wishes to continue the existing ECF arrangement. The authorities feel the program provides continuity for the transition, and helps safeguard macroeconomic stability, while supporting reforms to address long-standing structural problems. Program performance has been satisfactory, with all performance criteria and most quantitative targets and structural benchmarks met. Staff’s assessment is that the transition authorities have the technical capacity and political will to implement the agreed measures. Growth has been revised downwards following multiple shocks. Reductions in commodity prices for the country’s two leading exports, the impact of Ebola in the region on tourism and services, and political uncertainty leading up to resignation of Compaoré’s government in late October 2014 all contributed to a marked slowdown in growth. Real growth is estimated to have been 4 percent in 2014 and is projected at 5 percent for 2015. Lower fiscal revenues forced large spending reduction/import compression. To eliminate large external and fiscal imbalances implied by the shocks and recent depreciation of the CFAF against the US dollar, through the CFAF peg to the euro, the transition government has reduced spending sharply. Even with spending adjustment, revenue measures, and additional budget support commitments from donors, large reserves drawdown will be required meet balance of payment needs. Together with approval of the delayed 2nd review and the 3rd review, the authorities request 40 percent of quota augmentation of access to help meet immediate balance of payments needs. Forward-looking program commitments encompass wide-ranging measures that have both immediate and longer term impacts. Revenue measures aim to reduce fraud and increase revenue intake, along with passage of the long-awaited revised mining code. Spending measures aim to safeguard priority social spending and contain the public wage bill. Extensive reforms are underway to improve budget transparency and cash management, after cash rationing in 2014 gave rise to domestic arrears. Finally, the authorities will implement recommendations of recent audits of state-owned energy companies, including performance contracts to regularize financial obligations and reduce costs, providing scope for better cost recovery, including through more flexible price-setting, in the future.
The purpose of the monitoring and evaluation process is to determine to what extent proposed actions/sub-actions have been accomplished, and to take policy corrective action to accomplish the objectives of the National Development Strategy. Monitoring and evaluation is done on the basis of process and performance indicators. The monitoring process will generate progress reports and will be reported at sixth-month intervals. A report on the evaluation of the National Development Strategy will be prepared at the end of each year of implementation.
The Austrian economy performed well, but long-term problems were unaddressed. Austria has weathered the slump well. The government's economic policy priorities and recent achievements have been commendable. Tax reform will help improve the economy's long-term growth potential. Successful reform of inter-governmental fiscal relations is key to achieving the medium-term fiscal objectives. The recent pension reform will ensure long-term sustainability of the pension system. The creation of the financial market authority has strengthened financial supervision but continued vigilance is required. The government's structural reform agenda is appropriate.